Once a Trader, Always a Trader: The Role of Traders in Fund Management

49 Pages Posted: 9 Feb 2024

See all articles by Gjergji Cici

Gjergji Cici

University of Kansas - School of Business

Philipp Schuster

University of Stuttgart

Franziska Weishaupt

University of Stuttgart

Date Written: January 22, 2024

Abstract

Mutual fund families are increasingly assigning traders to manage corporate bond mutual funds. Using this setting to study the role of traders in investment management, we document that trader managers identify and exploit short-term trading opportunities at lower transaction costs. These skills are particularly valuable during periods of market stress. Moreover, trader managers exhibit sophisticated risk management behavior: They reduce credit risk during periods of market stress and take more maturity risk during periods of large interest rate fluctuations, while holding portfolios with greater convexity. The combination of these skills produces relative outperformance during periods of large interest rate fluctuations.

Keywords: Traders; fund managers; transaction costs; corporate bonds

JEL Classification: G11, G23, D83, J24

Suggested Citation

Cici, Gjergji and Schuster, Philipp and Weishaupt, Franziska, Once a Trader, Always a Trader: The Role of Traders in Fund Management (January 22, 2024). Available at SSRN: https://ssrn.com/abstract=4702553 or http://dx.doi.org/10.2139/ssrn.4702553

Gjergji Cici (Contact Author)

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-3873 (Phone)

HOME PAGE: http://business.ku.edu/gjergji-cici

Philipp Schuster

University of Stuttgart ( email )

Keplerstraße 17
D-70174 Stuttgart
Germany
+49 711 685-86001 (Phone)

Franziska Weishaupt

University of Stuttgart ( email )

Keplerstraße 17
D-70174 Stuttgart
Germany

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