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You’re Fired! New Evidence on Portfolio Manager Turnover and Performance

Published online by Cambridge University Press:  28 September 2015

Leonard Kostovetsky*
Affiliation:, Boston College, Carroll School of Management, Chestnut Hill, MA 02467
Jerold B. Warner
Affiliation:, University of Rochester, Simon School, Rochester, NY 14627.
*Corresponding author:


We study managerial turnover for both internally managed mutual funds and those managed externally by subadvisors. We argue that turnover of subadvisors provides sharper tests and helps address several unresolved issues and puzzles from the previous literature. We find dramatically stronger inverse relations between subadvisor departures and lagged returns, and new evidence on how past flow predicts turnover. We find no evidence of improvements in return performance related to departures, but flow improvements are associated with departures of poor past performers. Our findings represent new evidence on how investors, sponsors, and boards learn about and evaluate mutual fund management performance.

Research Articles
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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