Performance Characteristics of Individual vs. Team Managed Mutual Funds

25 Pages Posted: 26 Sep 2006

See all articles by Richard T. Bliss

Richard T. Bliss

Babson College - Finance Division

Mark Potter

Babson College - Finance Division

Christopher Schwarz

University of California at Irvine

Date Written: September 20, 2006

Abstract

In the fields of psychology and evolution, there is a large body of theory and evidence on how individual behavior differs from group behavior, particularly for performance and risk-taking activities. Even so, relatively little attention has been devoted to this topic for research on managed portfolios, though over 50% of mutual funds are managed by a team. This study is an empirical examination of whether funds managed by individuals perform differently than funds managed by teams. Using a sample of about three thousand equity mutual funds over a twelve-year horizon, we find that though funds managed by teams has grown by seven times the rate of funds managed by individuals, there is no significant difference in performance on a risk-adjusted basis. However, funds managed by teams are significantly less risky. In addition to differences in turnover in many fund categories, the total cost of owning a team-managed mutual fund is nearly fifty basis points lower per year than a mutual fund managed by an individual, on average.

Keywords: mutual funds, team, behavorial

Suggested Citation

Bliss, Richard T. and Potter, Mark E. and Schwarz, Christopher, Performance Characteristics of Individual vs. Team Managed Mutual Funds (September 20, 2006). Available at SSRN: https://ssrn.com/abstract=932948 or http://dx.doi.org/10.2139/ssrn.932948

Richard T. Bliss

Babson College - Finance Division ( email )

Babson Park, MA 02457-0310
United States
781-239-5883 (Phone)
781-239-6465 (Fax)

Mark E. Potter (Contact Author)

Babson College - Finance Division ( email )

Tomasso Hall #120
Babson Park, MA 02457-0310
United States
781-239-6492 (Phone)
781-239-5004 (Fax)

Christopher Schwarz

University of California at Irvine ( email )

Irvine, CA 92697-3125
United States

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