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Good Stewards, Cheap Talkers, or Family Men? The Impact of Mutual Fund Closures on Fund Managers, Flows, Fees, and Performance

Posted: 10 May 2006 Last revised: 4 Mar 2008

Huseyin Gulen

Purdue University - Krannert School of Management

P. Raghavendra Rau

University of Cambridge

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Padmaja Kadiyala

Pace University - Lubin School of Business

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Abstract

We examine a sample of 125 equity mutual funds that closed to new investment between 1993 and 2004. We find that funds close following a period of superior performance and abnormal fund inflows. Fund managers raise their fees when they close to compensate managers for losses in income due to the restrictions in size imposed by the fund closure decision. Managers reopen when fund size declines. However, they do not earn superior returns after re-opening, suggesting that the fund closure decision does not provide information about superior fund managers.

Keywords: Mutual funds, Fund flows, Fund size, Fund returns, Fund manager performance

Suggested Citation

Gulen, Huseyin and Rau, P. Raghavendra and Bris, Arturo and Kadiyala, Padmaja, Good Stewards, Cheap Talkers, or Family Men? The Impact of Mutual Fund Closures on Fund Managers, Flows, Fees, and Performance. Review of Financial Studies, Vol. 20, No. 3, pp. 953-982, 2007. Available at SSRN: https://ssrn.com/abstract=900303

Huseyin Gulen

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

Arturo Bris

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Padmaja Kadiyala

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
914-773-3620 (Phone)

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