Managerial commitment and heterogeneity in target-date funds

Mike Qinghao Mao and Ching Hin Wong

Journal of Empirical Finance, 2022, vol. 68, issue C, 1-19

Abstract: How a portfolio manager allocates own investment in a target date fund (TDF) series is informative about managerial commitment to the TDF investment principle. We find that TDFs whose managers choose to have positive ownership are associated with less idiosyncratic risk taking. In addition, TDFs with managers investing in remote funds and diversifying across TDFs exhibit high idiosyncratic risk taking. Overall, managerial commitment helps explain TDF heterogeneity; the impact of managerial discretion on fund investment strategies demonstrates externalities to 401(k) participants using TDFs as their default option.

Keywords: Default investment; TDF; Managerial commitment; Risk taking (search for similar items in EconPapers)
JEL-codes: G12 J32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:68:y:2022:i:c:p:1-19

DOI: 10.1016/j.jempfin.2022.05.001

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