Managerial Investment in Mutual Funds

Abigail Hornstein and James Hounsell
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James Hounsell: Centerview Partners, New York

No 2013-005, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: The SEC requires mutual fund managers to disclose annually investments in self-managed funds. We examine whether such investments align managerial and investor interests using a hand- collected panel dataset at nearly 400 no load funds. We believe we are the first to document and examine the time series variation in these investments. Managerial investment fluctuates markedly within funds, contrary to prior researchers’ assumptions that the levels would be non- decreasing, and is not systematically related to fund characteristics. Fund returns are higher for solo-managed funds with managerial investment. On the other hand, team-managed funds have lower excess returns and management fees when managers invest more in the fund. These results suggest that managerial investment does not signal interest alignment but is rather an idiosyncratic personal decision.

Keywords: mutual funds; managerial ownership; fund governance; fund performance (search for similar items in EconPapers)
JEL-codes: G29 G32 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2013-02
New Economics Papers: this item is included in nep-cdm
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2013-005

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