Brain Drain: Are Mutual Funds Losing Their Best Minds?

Leonard Kostovetsky ()
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Leonard Kostovetsky: Fulton Hall 320C, Boston College, Carroll School of Management, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA

Quarterly Journal of Finance (QJF), 2017, vol. 07, issue 03, 1-38

Abstract: I investigate the effect of labor market competition from hedge funds on the mutual fund industry. I find evidence of an increasing flight of top-performing young managers from mutual funds, a drop in mutual fund returns, and deterioration in recruiting standards. These findings are not explained by differences in fund characteristics, risk loadings, fund styles, or the intervening dot-com bubble. The results suggest that industry-specific government regulations, especially ones focused on employee compensation, can lead to brain drains that have crippling effects on the health of the regulated sector.

Keywords: Mutual funds; hedge funds; human capital (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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DOI: 10.1142/S2010139217500094

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