Fund Family Tournament and Performance Consequences: Evidence from the UK fund industry

Abstract

(2014) 'Fund family tournament and performance consequences : evidence from the UK fund industry.', Multinational nance journal., 18 (1/2). pp. 43-84. Further information on publisher's website:http://www.mfsociety.org/modules/modDashboard/uploadFiles/journals/googleScholar/862.html Publisher's copyright statement:Additional information: Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Yaoyao Fu Durham University , UKBy applying tournament analysis to the UK Unit Trusts data, the results support significant risk shifting in the family tournament; i.e. interim winning managers tend to increase their level of risk exposure more than losing managers. It also shows that the risk-adjusted returns of the winners outperform those of the losers following the risk taking, which implies that risk altering can be regarded as an indication of managers' superior ability. However, the tournament behaviour can still be a costly strategy for investors, since winners can be seen to beat losers in the observed returns due to the deterioration in the performance of their major portfolio holdings. (JEL: G20, G23)