Why is there so much side-by-side management in the ETF industry?

55 Pages Posted: 22 Jul 2021 Last revised: 18 Nov 2021

See all articles by Mancy Luo

Mancy Luo

Erasmus University

David Schumacher

McGill University

Date Written: November 15, 2021

Abstract

As of 2018, around 60% of individual ETF managers manage mutual funds in a “side-by-side” arrangement, most of which are “active” mutual funds. Mutual fund managers with institutional clients but exposed to strong ETF competition are most likely to adopt such dual roles. Side-by-side initiations lead to discretionary institutional outflows from mutual funds and contemporaneous inflows in the manager’s ETFs. These results are driven by institutional clients with likely stronger relationships with the manager. Side-by-side ETFs charge higher expenses than competing ETFs suggesting that exploiting manager-client loyalty allows mutual fund firms to soften and manage the rise of ETFs.

Keywords: ETF managers, mutual fund managers, side-by-side management, flows.

JEL Classification: G23

Suggested Citation

Luo, Mancy and Schumacher, David, Why is there so much side-by-side management in the ETF industry? (November 15, 2021). Available at SSRN: https://ssrn.com/abstract=3890147 or http://dx.doi.org/10.2139/ssrn.3890147

Mancy Luo

Erasmus University ( email )

Burgemeester Oudlaan 50,
Mandeville Building, Room T08-47,
Rotterdam, 3062PA
Netherlands

HOME PAGE: http://sites.google.com/site/mancyluofinance/

David Schumacher (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
5143984778 (Phone)

HOME PAGE: http://www.davidschumacher.info

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