Strategic Performance Allocation in Institutional Asset Management Firms: Behold the Power of Stars and Dominant Clients

Chaudhuri, Ranadeb; Ivkovich, Zoran; Trzcinka, Charles

doi:10.2139/ssrn.2024290

Cited by 9 publications

(3 citation statements)

References 61 publications

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“…We also investigate the extent to which cross-trading (also called internalization) among funds in the same institution may explain our results. Chaudhuri, Ivkovic, and Trzcinka (2013) find evidence that institutions cross-trade in order to benefit one fund at the expense of another, behavior about which the Pension and Welfare Benefits Administration of the U.S. Department of Labor has expressed serious concern (U.S. Department of Labor, 1998). We define potential cross-trades as instances where the same stock is bought by one fund and sold by another fund belonging to the same institution, at the same price on the same day.…”

Section: Robustness Checksmentioning

confidence: 99%

Institutional Holding Periods

2013

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We find wide dispersion in trade holding periods for institutional money managers and pension funds. All of the funds execute round-trip trades lasting over a year; 96% of them also execute trades lasting less than one month, although average short-duration trade returns are negative. We find only limited evidence that institutions choose holding periods based on portfolio optimization and no evidence that shortduration trades are driven by the disposition effect. Our results are consistent with the agency problem that arises when clients cannot distinguish when a manager is "actively doing nothing" versus "simply doing nothing" as well as manager overconfidence.

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Section: Robustness Checksmentioning

confidence: 99%

Institutional Holding Periods

2013

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“…Additional papers studying favoritism within asset management companies includeNanda, Wang, and Zheng (2004); Ritter and Zhang (2007);Massa and Rehman (2008); Evans (2010); Bhattacharya, Lee, and Pool (2012); andChaudhuri, Ivkovic, and Trzcinka (2012).…”

mentioning

confidence: 99%

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans

2013

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This paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.

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“…There is considerable evidence that mutual fund families follow strategies to maximize the returns to the family as a whole (Chaudhuri et al, 2012;Guedj and Papastaikoudi, 2004), even if at the expense of certain funds within the family. Gaspar et al (2006) show that mutual fund families boost the performance of the member funds that are more likely to increase overall family pro…ts.…”

Section: Board Overlap and Strategic Performance Transfer In Mutual Fmentioning

confidence: 99%

Board Overlaps in Mutual Fund Families

Hornstein,

Sisli Ciamarra

2016

SSRN Journal

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We examine a unique characteristic of mutual fund governance: a common set of directors serving simultaneously on the boards of multiple funds within a fund family. At …rst glance, this governance structure appears to bene…t investors because it is associated with higher fund returns and better fund manager quality. However, funds with higher degrees of board overlap also charge higher marketing and distribution fees, which have been criticized as being the least transparent cost component for mutual fund investors. Board overlaps are also associated with detrimental unobserved actions by fund managers: window dressing and strategic performance transfer between funds occur more often in mutual fund families with greater degrees of director overlap. We conclude that director oversight of multiple funds is a mixed blessing.

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Strategic Performance Allocation in Institutional Asset Management Firms: Behold the Power of Stars and Dominant Clients

Cited by 9 publications

References 61 publications

Institutional Holding Periods

Institutional Holding Periods

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans

Board Overlaps in Mutual Fund Families

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