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Horses for Courses: Fund Managers and Organizational Structures

Published online by Cambridge University Press:  27 December 2017

Yufeng Han ,
Tom Noe  and
Michael Rebello
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Abstract

We model and test the relations between the team management of mutual funds, managers’ ability, performance, and holdings. Our model predicts that team-managed funds perform better and behave more conservatively than single-manager funds. However, the effect of team management is masked in equilibrium because high-ability managers rationally self-select into single-manager funds. Consistent with the model’s prediction, we find that team-managed funds perform better and deviate less from their benchmark allocations than single-manager funds with the same characteristics. These differences are marked after we control for the endogenous self-selection of managers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 6 , December 2017 , pp. 2779 - 2807
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

We thank an anonymous referee, Janis Berzins, Stephen Brown (the editor), Bartley Danielsen, Jie Gan, Karlyn Mitchell, Anthony Saunders, Richard Warr, Kelsey Wei, and seminar participants at North Carolina State University, University of Colorado Denver, the 2008 ISCTE Business School/Nova Annual Finance Conference, the 2008 Singapore International Conference on Finance, the 2013 Luxembourg Asset Management Summit, and the Southern Finance Association annual meetings for helpful comments, and Susan Bergman for editorial help. Han acknowledges the financial support from the National Science Foundation of China (71572052).

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