Purpose -Glode provides theoretical and empirical evidence that, in aggregate, funds underperform during economic expansions and outperform during contractions. The authors find that this result is not robust to the more appropriate conditional CAPM and to alternative methods for estimating market states. The purpose of this paper is therefore to thoroughly analyze mutual fund performance across the business cycle by disaggregating funds into different investment objectives to determine which funds possess this cyclical performance and which do not. Design/methodology/approach -In this paper, the authors employ a conditional asset pricing model that better captures the variations in the pricing kernel in different economic states. The empirical model adjusts for time-variation in both risk (beta) and performance (alpha). The authors specify economic states using an ex-ante measure, the expected market risk premium. This measure is continuous and better captures changing economic circumstances than the ex-post, binary NBER cycle dates that are common in the mutual fund literature. Findings -In this conditional framework, the authors find that recession protection is only offered by certain types of equity mutual funds. Managers of small-cap and mid-cap growth equity funds are able to deliver such state-dependent performance but managers of value funds do not. In a comparison of active mutual funds with passive counterparts, it is found that both the stocks held by the small-cap managers as well as their stewardship of the portfolio contribute to that performance. Originality/value -Drawing from the recent asset pricing literature, the authors are the first to adapt an integrated conditional CAPM framework to examine the state-dependent performance of mutual funds. Rather than report aggregate equity mutual fund performance, the authors provide an analysis for subsets of mutual funds separated by investment styles. Both managers of and investors in these funds will benefit from an understanding of how portfolio performance is impacted by changing economic conditions.

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