Do Families Matter in Institutional Money Management Industry: The Case of New Portfolio Openings

50 Pages Posted: 3 Oct 2005

Date Written: September 18, 2005

Abstract

This study investigates whether family level analysis matters in the institutional money management industry by examining new portfolio openings in a large survivorship bias free sample of institutional money management families. I examine whether low-skill families that open new portfolios are successful in attracting significant new cash flows despite poor past performance in other family funds. I find that they are successful in attracting significant new cash flows. I also examine the future performance of these new funds. Using time varying alphas, I find that the fund families performing below average in one year create portfolios that on average underperform for up to three subsequent years. I call this combination of results the family new fund paradox. It is a paradox, because the fund flows indicate that institutional investors are not collecting and/or using information about prior family performance that would be useful in predicting the future performance of these new funds. My findings are robust to the known persistence among the worst performing families.

Keywords: mutual funds, pension funds, fund flows, performance persistence, window dressing

JEL Classification: G2, G1, L1, L2

Suggested Citation

Berzins, Janis, Do Families Matter in Institutional Money Management Industry: The Case of New Portfolio Openings (September 18, 2005). Available at SSRN: https://ssrn.com/abstract=811209 or http://dx.doi.org/10.2139/ssrn.811209

Janis Berzins (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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