Mutual funds' performance: the role of distribution networks and bank affiliation

Giorgio Albareto (), Andrea Cardillo (), Andrea Hamaui () and Giuseppe Marinelli
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Giorgio Albareto: Bank of Italy
Andrea Hamaui: Harvard University

No 1272, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The paper investigates how the characteristics of the distribution network and the affiliation to a banking group affect mutual funds performance exploiting a unique dataset with extremely detailed information on funds’ portfolios and bank-issuer relationships for the period 2006-2017. We find that bank-affiliated mutual funds underperform independent ones. The structure of the distribution channels is a key-factor affecting mutual funds' performance: when bank platforms become by far the prevalent channel for the distribution of funds’ shares, asset management companies are captured by banks. As for bank affiliation, results show a positive bias of bank-controlled mutual funds towards securities issued by their own banking group clients (of the lending and investment banking divisions) and by institutions belonging to their own banking group; this last bias is exacerbated for mutual funds belonging to undercapitalized banking groups. The structure of the distribution channels explains two thirds of bank-affiliated mutual funds underperformance, whereas investment biases explain one fourth of the observed differential in returns with independent mutual funds.

Keywords: mutual funds; mutual funds performance; distribution networks; conflict of interest (search for similar items in EconPapers)
JEL-codes: G11 G21 G23 G32 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eec, nep-eff and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1272_20

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