Trading out of sight: An analysis of cross-trading in mutual fund families

Alexander Eisele, Tamara Nefedova, Gianpaolo Parise and Kim Peijnenburg

Journal of Financial Economics, 2020, vol. 135, issue 2, 359-378

Abstract: This paper explores how mutual fund groups set the price of in-house transactions among affiliated funds. We collect a data set of four million equity transactions and compare the pricing of trades crossed internally (cross-trades) with that of twin trades executed with external counterparties. While cross-trades should reduce transaction costs for both trading parties, we find that the price of cross-trades is set strategically to reallocate performance among sibling funds. Furthermore, we provide evidence that a large number of cross-trades are backdated. We discuss the implications for the literature on fund performance and the current regulatory debate.

Keywords: Mutual fund families; Cross-trades; Monitoring; Backdating; Transfer pricing (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Trading Out of Sight: An Analysis of Cross-Trading in Mutual Fund Families (2018)
Working Paper: Trading Out of Sight: An Analysis of Cross-Trading in Mutual Fund Families (2017)
Working Paper: Trading Out of Sight: An Analysis of Cross-Trading in Mutual Fund Families (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:135:y:2020:i:2:p:359-378

DOI: 10.1016/j.jfineco.2018.12.005

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