Madison Avenue Meets Wall Street: Mutual Fund Families, Competition and Advertising

Abstract

We examine the effects of mutual fund families' strategic decisions, particularly the advertising decision, on investor flows into the families. We find evidence that beyond performance a family's strategic decisions such as advertising, distribution channels, fund offerings and expense ratios, have significant effects on investor flows. Consistent with evidence at the individual fund level, investor flows have an increasing and convex relation to a family's past performance for high performing families. We also find a similar association between a family's flows and its relative levels of advertising expenditures with a significant positive effect for high relative advertisers only.

Keywords: funds, advertising, flows, fundflows