Skill, Scale, and Value Creation in the Mutual Fund Industry

Laurent Barras, Patrick Gagliardini and Olivier Scaillet

Journal of Finance, 2022, vol. 77, issue 1, 601-638

Abstract: We develop a flexible and bias‐adjusted approach to jointly examine skill, scalability, and value‐added across individual funds. We find that skill and scalability (i) vary substantially across funds, and (ii) are strongly related, as great investment ideas are difficult to scale up. The combination of skill and scalability produces a value‐added that (i) is positive for the majority of funds, and (ii) approaches its optimal level after an adjustment period (possibly due to investor learning). These results are consistent with theoretical models in which funds are skilled and able to extract economic rents from capital markets.

Date: 2022
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Citations: View citations in EconPapers (9)

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https://doi.org/10.1111/jofi.13096

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Working Paper: Skill, scale, and value creation in the mutual fund industry (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:77:y:2022:i:1:p:601-638

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