Are Star Funds Really Shining? Cross-trading And Performance Shifting In Mutual Fund Families

Alexander Eisele, Tamara Nefedova and Gianpaolo Parise
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Alexander Eisele: University of Lugano
Tamara Nefedova: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Gianpaolo Parise: AUTRES
Authors registered in the RePEc Author Service: Kim Peijnenburg

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Abstract: This paper exploits institutional trade level data to study cross-trading activity inside mutual fund families. Cross-trades are opposite trades matched between siblings (i.e., funds belonging to the same fund family) without going to the open market. We find that large fund families with weak governance and high within family size dispersion cross-trade more and are more likely to misprice their cross-trades. Additionally, we find that cross-trades are used to increase the performance of the most valuable siblings (on average by 2.5% per annum) at the expense of the less valuable funds. More restrictive governance policies introduced as a consequence of the late trading scandal were effective in reducing the amount and the mispricing of cross-trades.

Keywords: Cross-trading; Performance; Governance; Mutual Fund Families (search for similar items in EconPapers)
Date: 2015-06
Note: View the original document on HAL open archive server: https://hal.science/hal-01458357v1
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Published in 32nd International Conference of the French Finance Association - AFFI 2015, Jun 2015, Cergy, France. pp.42

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Related works:
Working Paper: Are star funds really shining? Cross-trading and performance shifting in mutual fund families (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01458357

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