Why is There So Much Side-by-Side Management in the ETF Industry?

79 Pages Posted: 22 Jul 2021 Last revised: 17 Mar 2023

See all articles by Mancy Luo

Mancy Luo

Erasmus University

David Schumacher

McGill University

Date Written: March 17, 2023


As of 2018, around 60% of ETF managers manage mutual funds in a "side-by-side" arrangement, most of which are active mutual funds. Mutual fund managers with institutional clients and exposed to strong ETF competition are most likely to adopt such dual roles. Side-by-side initiations lead to discretionary institutional mutual fund outflows and contemporaneous ETF inflows. These results are primarily driven by institutional "relationship" clients. Side-by-side ETFs charge an expense premium, suggesting that mutual fund firms exploit manager-client loyalty to mitigate the impact of rising ETF competition and to support the firms' transition to a new product portfolio with 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? (March 17, 2023). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022, 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

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

David Schumacher (Contact Author)

McGill University ( email )

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

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

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