The Exclusive Role of Centralized Fund Family Management
- PDF / 551,218 Bytes
- 38 Pages / 439.642 x 666.49 pts Page_size
- 82 Downloads / 163 Views
The Exclusive Role of Centralized Fund Family Management David Hunter1
· Zhen Sun1 · Karen Benson1
Received: 13 September 2018 / Revised: 11 November 2019 / Accepted: 4 December 2019 / © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract Fund families are centrally managed, and can directly control resource allocations between funds. We quantify multiple manageable fund family attributes, and examine their combined effects upon returns and investor flows. We focus upon five attributes that are exclusively manageable by fund families: marginal fee economies of scale, star fund offerings, mixed high and low risk product offerings, within-family manager scope, and manager outsourcing. We find sensitivity differences during the financial crisis and non-crisis time periods. Management of these exclusive attributes significantly improve a fund family’s returns and investor flows, benefiting fund families and their investors during both normal and financial crisis periods. We find that investors reward fund families with greater performance sensitive inflows and weaker performance sensitive outflows, indicating that investors identify greater utility in centrally managed fund families. Keywords Non-bank financial institutions · Mutual funds · Investment performance JEL Classification G23
1 Introduction Mutual fund families (Haslem and Scheraga 2003) centrally manage their constituent mutual funds, yet we understand little about the incentives guiding family management decisions. Our paper examines the combined effects of multiple factors that have been shown to affect fund family performance and investor flows. We posit that a mutual fund family seeks to maximize its collective performance, which derives from fee revenues as a percent of assets under management. We show that investors reward centralized family management
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10693-019-00328-2) contains supplementary material, which is available to authorized users. David Hunter
[email protected] 1
University of Queensland, St. Lucia, QLD 4067, Australia
Journal of Financial Services Research
with greater performance sensitive inflows and weaker performance sensitive outflows, suggesting that investors identify greater utility in centralized family managements. Fund families have a centralized management structure that can directly control product offerings and resource allocations between funds. Benson et al. (2008) suggest that fund family management sits at the top of a hierarchy, and it guides resource allocations among member funds.1 If a fund family’s management seeks to maximize the NPV of revenues, it should engage in activities that promote its assets under management. Product offerings and return opportunities can both be used to do so Khorana and Servaes (2007). Thus, centralized fund family managers can experience flow/performance incentives (Chevalier and Ellison 1997) that are similar to those of independent fund managers, y
Data Loading...
