Does Individual Fund Shareholder Structure Matter? A Study of Exclusive Funds in Brazil
Hsiu-lang Chen () and
Rodrigo F. Malaquias ()
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Hsiu-lang Chen: Department of Finance, University of Illinois at Chicago, 601 South Morgan Street, Chicago, IL 60607, U.S.A., http://business.uic.edu/faculty/hsiu-lang-chen
Rodrigo F. Malaquias: Department of Finance, School of Business and Management, Federal University of Uberlandia Av., Jo?o Naves de ¨¢vila, no 2121, Room 1F-200, Uberlandia, MG 38400-902, BRAZIL, http://www.fagen.ufu.br/pessoa/rodrigo-fernandes-malaquias
Review of Economics & Finance, 2018, vol. 12, 1-15
This study investigates the role of fund shareholder structure on the agency conflicts in delegated investment management. An exclusive fund is designed to receive investments from one investor only and it is unique in Brazil. Specifically, we examine equity fund managers who manage both exclusive mutual funds and traditional mutual funds in Brazil. We find that the 4-factor alpha of exclusive funds from a manager who manages both exclusive and traditional funds is higher than that of the manager¡¯s traditional funds. Furthermore, we show that a fund manager has a greater incentive to improve his/her exclusive funds instead of traditional funds when both suffer poor performance. The behavior of prioritizing shareholders of exclusive funds is particularly strong during a period when the market volatility is high.
Keywords: Exclusive mutual funds; Conflict of interest; Delegated investment management; Agency conflicts; 4-factor alpha (search for similar items in EconPapers)
JEL-codes: G10 G11 G23 (search for similar items in EconPapers)
Note: Chen gratefully acknowledges the support from the Dean¡¯s Summer Research Grant Program at the University of Illinois at Chicago. Malaquias thanks FAPEMIG for the support in developing the database for this study (APQ-01265-14), and Prof. William Eid Jr. for his comments on characteristics of Exclusive Funds in Brazil. All errors remain our responsibility.
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