The Modern Mutual Fund Family

59 Pages Posted: 23 Feb 2022 Last revised: 3 Feb 2023

See all articles by Caitlin D. Dannhauser

Caitlin D. Dannhauser

Villanova University - Department of Finance

Harold D. Spilker III

University Of Hawaii At Manoa, Shidler College of Business

Date Written: February 2, 2023

Abstract

Modern mutual fund families include more than active mutual funds (AMFs). AMFs in families with greater index mutual fund (IMF) presence generate higher category-adjusted gross returns. Performance is positively related to the levels of passive and active fees, suggesting moral hazard. Intrafamily competition from IMFs in the same Morningstar category incentivizes managers to exert effort. Financial resources do not contribute to the performance effect. Cross-trading with IMFs occurs with some positive effect on performance. ETFs have no impact on performance. IMFs reduce flow-performance sensitivity and flow volatility of AMFs in the family. IMFs and ETFs uniquely contribute to expense pressure.

Keywords: Mutual fund families; Active management; Passive management; Competition; Moral hazard; Cross-trading

JEL Classification: G11; G23; L22; M52

Suggested Citation

Dannhauser, Caitlin D. and Spilker III, Harold D., The Modern Mutual Fund Family (February 2, 2023). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=4024314 or http://dx.doi.org/10.2139/ssrn.4024314

Caitlin D. Dannhauser (Contact Author)

Villanova University - Department of Finance ( email )

United States
610-519-4348 (Phone)

Harold D. Spilker III

University Of Hawaii At Manoa, Shidler College of Business ( email )

2404 Maile Way
Honolulu, HI 96822
United States
8089568738 (Phone)

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