Fund Managers' Institutional Background and the Birth of Investment Management Companies

48 Pages Posted: 29 Mar 2006

See all articles by Robert W. Faff

Robert W. Faff

University of Queensland

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance; UNSW Business School; Financial Research Network (FIRN)

Joey Wenling Yang

The University of Western Australia - UWA Business School

Date Written: 2006

Abstract

This paper presents new evidence on the origins of investment management companies. Specifically, we examine the characteristics and nature of those "parent" fund companies from which at least one of their key fund manager personnel departed to establish their own independent firms. Covering the period 1980 and 2003, we create a unique hand-collected database of money management firm founders and their "parents." We find that larger, more reputable and more diversified firms with a significant presence in growth-oriented investment objectives are more likely to produce start-ups. Coming from larger companies increases the time it takes for a start-up to attain significant assets under management. Fund managers with experience in more diversified firms and those that are dominated by growth funds experience shorter time to "significant" assets. Locating a start-up geographically closer to a founder's previous employer results in a faster time to market. An analysis of the similarities between parent and start-ups' stock holdings shows that there is almost double the commonality of stocks held, than previously documented for competing mutual funds. The main driver of commonality in stock selection is the number of founders coming from a single parent firm.

Keywords: Investment management firms, Fund manager background, Entrepreneurial activities

JEL Classification: G23, L22

Suggested Citation

Faff, Robert W. and Parwada, Jerry T. and Yang, Joey Wenling, Fund Managers' Institutional Background and the Birth of Investment Management Companies (2006). Available at SSRN: https://ssrn.com/abstract=893481 or http://dx.doi.org/10.2139/ssrn.893481

Robert W. Faff (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

UNSW
Sydney, NSW 2052
Australia

HOME PAGE: http://www.firn.org.au

Joey Wenling Yang

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

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