Hostname: page-component-8448b6f56d-cfpbc Total loading time: 0 Render date: 2024-04-18T09:22:03.364Z Has data issue: false hasContentIssue false
  • English
  • Français

The Determinants of the Flow of Funds of Managed Portfolios: Mutual Funds vs. Pension Funds

Published online by Cambridge University Press:  06 April 2009

Diane Del Guercio  and
Paula A. Tkac
Diane Del Guercio
Affiliation:
dianedg@oregon.uoregon.edu, Lundquist College of Business, University of Oregon, Eugene, OR 97403
Paula A. Tkac
Affiliation:
paula.tkac@atl.frb.org, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree St. NE, Atlanta, GA 30309.
Get access Rights & Permissions [Opens in a new window]

Abstract

This study compares the relations between asset flow and performance in the retail mutual fund and fiduciary pension fund segments of the money management industry, and relate empirical differences to fundamental differences in the clientele they serve. A striking difference is the shape of the flow-performance relation. In contrast to mutual fund investors, pension clients punish poorly performing managers by withdrawing assets under management and do not flock disproportionately to recent winners. We interpret these and other empirical differences in the context of the manager evaluation procedures typical in each segment. We conclude that pension managers have little incentive to engage in the risk-shifting behavior previously identified among mutual fund managers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 37 , Issue 4 , December 2002 , pp. 523 - 557
Copyright
Copyright © School of Business Administration, University of Washington 2002

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ackermann, C. “The Impact of Regulatory Restrictions on Fund Performance: A Comparative Study of Hedge Funds and Mutual Funds.” Working Paper, Univ. of Notre Dame (1997).Google Scholar
Admati, A., and Pfleiderer, P.. “Does It All Add Up? Benchmarks and the Compensation of Active Portfolio Managers.” Journal of Business, 70 (1997), 323–350.CrossRefGoogle Scholar
Bergstresser, D., and Poterba, J.. “Do After-Tax Returns Affect Mutual Fund Inflows?” Journal of Financial Economics, 63 (2002), 381–414.CrossRefGoogle Scholar
Bernstein, P. “Where, Oh Where Are the.400 Hitters of Yesteryear?” Financial Analysts Journal, 54 (1998), 1–9.CrossRefGoogle Scholar
Bodie, Z.; Kane, A.; and Marcus, A.. Investments. 4th ed. Boston, , MA: Irwin McGraw Hill (1999).Google Scholar
Brown, K.; Harlow, W.; and Starks, L.. “Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry.” Journal of Finance, 51 (1996), 85–110.CrossRefGoogle Scholar
Brown, S., and Goetzmann, W.. “Performance Persistence.” Journal of Finance, 50 (1995), 679–698.CrossRefGoogle Scholar
Busse, J. “Another Look at Mutual Fund Tournaments.” Journal of Financial and Quantitative Analysis, 36 (2001), 53–74.CrossRefGoogle Scholar
Carhart, M. “Survivor Bias and Mutual Fund Performance.” Working Paper, Univ. of Southern California (1995).Google Scholar
Capon, N.; Gavan, J.; and Prince, R.. “An Individual Level Analysis of the Mutual Fund Investment Decision.” Journal of Financial Services Research, 10 (1996), 59–82.CrossRefGoogle Scholar
Chan, L.; Chen, H.; and Lakonishok, J.. “On Mutual Fund Investment Styles.” Working Paper, Univ. of Illinois at Urbana-Champaign (1998).Google Scholar
Chen, H.-L., and Pennacchi, G.. Does Prior Performance Affect a Mutual Fund's Choice of Risk? Theory and Further Empirical Evidence.” Working Paper, Univ. of Illinois at Urbana-Champaign (2000).Google Scholar
Chevalier, J., and Ellison, G.. “Risk Taking by Mutual Funds as a Response to Incentives.” Journal of Political Economy, 105 (1997), 1167–1200.CrossRefGoogle Scholar
Christopherson, J.; Ferson, W.; and Glassman, D.. “Conditioning Manager Alphas on Economic Information: Another Look at the Persistence of Performance.” Review of Financial Studies, 11 (1998) 111–142.CrossRefGoogle Scholar
Coggin, T.; Fabozzi, F.; and Rahman, S.. “The Performance of U. S. Equity Pension Fund Managers.” Journal of Finance, 48 (1993), 1039–1056.CrossRefGoogle Scholar
Coggin, T., and Trzcinka, C.. “Performance of Equity Managers: Style versus Neural Network Benchmarks.” Working Paper, SUNY Buffalo (1995).Google Scholar
Cuoco, D., and Kaniel, R.. “General Equilibrium Implications of Fund Managers' Compensation Fees.” Working Paper, The Wharton School (1998).Google Scholar
Davis, E., and Steil, B.. Institutional Investors. Cambridge, MA: MIT Press (2001).CrossRefGoogle Scholar
Del Guercio, D., and Tkac, P.. “Star Power: The Effect of Morningstar Ratings on Mutual Fund Flows.” Working Paper, Univ. of Oregon (2001).Google Scholar
Edelen, R. “Investor Flows and the Assessed Performance of Open-End Mutual Funds.” Journal of Financial Economics, 53 (1999), 439–466.CrossRefGoogle Scholar
Elton, E.; Gruber, M.; and Blake, C.. “Survivorship Bias and Mutual Fund Performance.” Review of Financial Studies, 9 (1996), 1097–1120.CrossRefGoogle Scholar
Fant, F., and O'Neal, E.. “Temporal Changes in the Determinants of Mutual Fund Flows.” Journal of Financial Research, 23 (2000), 353–371.CrossRefGoogle Scholar
Ferson, W., and Khang, K.. “Conditional Performance Measurement Using Portfolio Weights: Evidence for Pension Funds.” Journal of Financial Economics (forthcoming 2002).CrossRefGoogle Scholar
Goetzmann, W., , N. and Peles, . “Cognitive Dissonance and Mutual Fund Investors.” Journal of Financial Research, 20 (1997), 145–158.CrossRefGoogle Scholar
Grinblatt, M., and Titman, S.. “Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings.” Journal of Business, 62 (1998), 393–416.CrossRefGoogle Scholar
Gruber, M. “Another Puzzle: The Growth in Actively Managed Mutual Funds.” Journal of Finance, 51 (1996), 783–810.CrossRefGoogle Scholar
Gupta, F., and Prajogi, R.. “The Information Ratio and Performance.” Journal of Portfolio Management, 26 (1999), 33–40.CrossRefGoogle Scholar
Halpern, P., and Fowler, I.. “Investment Management Fees and Determinants of Pricing Structure in the Industry.” Journal of Portfolio Management, 17 (1991), 74–79.CrossRefGoogle Scholar
Horan, S. “A Comparison of Indexing and Beta among Pension and Non-Pension Assets.” Journal of Financial Research, 21 (1998), 255–275.CrossRefGoogle Scholar
Ippolito, R. “Consumer Reaction to Measures of Poor Quality.” Journal of Law and Economics, 35 (1992), 45–70.CrossRefGoogle Scholar
Karceski, J. “Returns-Chasing Behavior, Mutual Funds and Beta's Death.” Working Paper, Univ. of Florida (2000).Google Scholar
Koski, J., and Pontiff, J.. “How are Derivatives Used? Evidence from the Mutual Fund Industry.” Journal of Finance, 54 (1999), 791–816.CrossRefGoogle Scholar
Lakonishok, J.; Shleifer, A.; and Vishny, R.. “The Structure and Performance of the Money Management Industry.” Brookings Papers: Microeconomics 1992, (1992), 339–391.CrossRefGoogle Scholar
Malkiel, B. “Returns from Investing in Equity Mutual Funds 1971 to 1991.” Journal of Finance, 50 (1995), 549–572.CrossRefGoogle Scholar
Patel, J.; Zeckhauser, R.; and Hendricks, D.. “Investment Flows and Performance: Evidence from Mutual Funds, Cross-Border Investments and New Issues.” In Japan, Europe and the International Financial Markets: Analytical and Empirical Perspectives, Satl, R., Levitch, R., and Ramachandran, R., eds. New York, NY: Cambridge Univ. Press (1994).Google Scholar
Sirri, E., and Tufano, P.. “Costly Search and Mutual Fund Flows.” Journal of Finance, 53 (1998), 1589–1622.CrossRefGoogle Scholar
Treynor, J., and Black, F.. “How to Use Security Analysis to Improve Portfolio Selection.” Journal of Business, 46 (1973), 66–86.CrossRefGoogle Scholar
White, H. “A Heteroskedasticity Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity.” Econometrica, 48 (1980), 817–838.CrossRefGoogle Scholar