Subcontracting in International Asset Management: New Evidence on Market Integration

Massimo Massa and David Schumacher

No 10465, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the decisions of international asset managers to outsource portfolio management of their funds and we link these decisions to market integration. Using a structural model of selfselection, we endogenize the decision to outsource in a comprehensive sample of international mutual funds and identify both performance and non-performance related determinants of outsourcing. Outsourcing fund management generates net positive gains to fund families of around 8-17 bp per month despite the ex-post underperformance of outsource funds relative to inhouse funds. Then, we establish that the performance improvements from outsourcing are directly related to segmentation in the underlying asset markets.

Keywords: International markets; market integration; Mutual funds; Outsourcing (search for similar items in EconPapers)
JEL-codes: G15 G23 G30 G32 (search for similar items in EconPapers)
Date: 2015-03
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