Favoritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization

Posted: 26 Oct 2004

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Jose-Miguel Gaspar

ESSEC Business School

Multiple version iconThere are 3 versions of this paper

Abstract

We investigate whether mutual fund families strategically transfer performance across member funds to favor those more likely to increase overall family profits. We find that 'High family value' funds (i.e. high fees or high past performers) over-perform at the expense of 'Low value' funds. Such performance gap is above the one existing between similar funds not affiliated to the same family. Better allocations of underpriced IPO deals and opposite trades across member funds explain partly why 'High value' funds over-perform. Our findings highlight how the family organization prevalent in the mutual fund industry generates distortions in delegated asset management.

Keywords: mutual funds, mutual fund families, family strategies, cross-trading, subsidization

JEL Classification: G20, G24, G23, G10

Suggested Citation

Massa, Massimo and Matos, Pedro and Gaspar, Jose-Miguel, Favoritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization. Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=609123

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Pedro Matos (Contact Author)

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Jose-Miguel Gaspar

ESSEC Business School ( email )

Avenue Bernard Hirsch
Cergy-Pontoise, 95021
France
+33 1 3443 3374 (Phone)
+33 1 3443 3212 (Fax)

HOME PAGE: http://www.essec.edu

Register to save articles to
your library

Register

Paper statistics

Abstract Views
881
PlumX Metrics