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Playing Favorites: Conflicts of Interest in Mutual Fund Management
Keywords: 5 words maximum
mutual fund managers, side-by-side management, conflicts of interest, underperformance
Very short description for use in the program to help attendees understand more than a title can describe
Using a new dataset hand collected from SEC regulatory filings, we compare the performance of funds with managers who receive performance-based fees in other accounts to funds without these side-by-side arrangements. We find that the side-by-side funds underperform other funds by 52.8 bps per year in Carhart alpha. The negative impact of side-by-side management is stronger in single-manager funds than in team-managed funds. Our evidence provides support for the conflicts of interest hypothesis, which suggests that the high-powered incentive fees in outside accounts (e.g., hedge funds) lead mutual fund managers to strategically shift returns from mutual funds to other accounts.
Lead & Corresponding Author
Diane Del Guercio, PhD, University of Oregon
Job Title
Professor of Finance
Additional Authors
Egemen Genc, PhD, Rotterdam School of Management, Erasmus University
Job Title
Assistant Professor of Finance
Hai Tran, University of Oregon
Job Title
Finance PhD student