The Effects of Mutual Fund Managers' Characteristics on Their Portfolio Performance, Risk and Fees

FINANCIAL SERVICES REVIEW

Posted: 19 Mar 1997  

Joseph H. Golec

University of Connecticut - Department of Finance

Abstract

The purpose of this study is to test whether a mutual fund managers' characteristics helps to explain fund performance, risk, and fees. The statistical tests consider performance, risk, and fees simultaneously to avoid biased results produced by earlier studies that ignore simultaneity. Results show that a fund's performance, risk, and fees are significantly impacted by its manager's characteristics. All else equal, investors can expect better risk-adjusted performance from younger managers with MBA degrees who have longer tenure at their funds. Also, funds with low fees and more diversified portfolios perform better. The most significant predictor of performance is the length of time a manager has managed his or her fund (tenure). Funds that keep administrative expenses low also perform relatively well but large management fees do not necessarily imply poorer performance. Apparently, a large management fee signals superior investment skill which leads to better performance.

JEL Classification: G11

Suggested Citation

Golec, Joseph H., The Effects of Mutual Fund Managers' Characteristics on Their Portfolio Performance, Risk and Fees. FINANCIAL SERVICES REVIEW. Available at SSRN: https://ssrn.com/abstract=8196

Joseph Golec (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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