Mutual Fund Incubation and the Role of the Securities and Exchange Commission

Carl Ackermann () and Tim Loughran ()

Journal of Business Ethics, 2007, vol. 70, issue 1, 33-37

Abstract: A mutual fund family incubates a fund when it creates a privately subsidized fund not available to the general investing public. It destroys unsuccessful incubator funds. The few successful funds will report higher incubation returns than the market return in advertisements intended to attract money from individual investors. This practice is currently allowed by the SEC. The evidence is that incubation returns are not a good predictor of subsequent fund performance and likely serve to mislead unsuspecting investors. Copyright Springer Science+Business Media, Inc. 2007

Keywords: mutual funds; incubation; Securities and Exchange Commission (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10551-006-9081-x

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