Journal article
Fund flow diversification: Implications for asset stability, fee-setting and performance
International review of financial analysis, Vol.95(Part A), 103360
10/2024
DOI: 10.1016/j.irfa.2024.103360
Abstract
We provide new evidence on the economic benefits to mutual fund families from having a portfolio of funds with diversified investor fund flows. We show that diversified fund families enjoy greater stability of assets under management, and experience significantly lower net cash outflows during an economic downturn. Given concave advisory fee schedules, the dominant industry fee structure, a reduction in asset volatility is potentially advantageous for family-level fee revenues. Consistent with this notion, we show that fund families with more diversified fund flows are able to strategically charge more competitive advisory fees across their funds. Our findings suggest that the diversification of fund families' asset flows is an important source of net performance gains for fund shareholders. These gains arise mostly in the more competitive industry segments.
•Diversified fund families experience greater asset stability and lower net cash outflows during economic downturns.•Fund flow diversification allows mutual fund families to charge more competitive advisory fees.•Investors in diversified fund families enjoy net performance gains, especially in more competitive industry segments.•We introduce new methods to quantify the sensitivity of asset volatility and fee revenue to fund flow diversification.•Robustness tests confirm the causal relationship between fund flow diversification and lower advisory fees.
Details
- Title: Subtitle
- Fund flow diversification: Implications for asset stability, fee-setting and performance
- Creators
- Lorenzo Casavecchia - University of Technology SydneyAshish Tiwari - University of Iowa
- Resource Type
- Journal article
- Publication Details
- International review of financial analysis, Vol.95(Part A), 103360
- Publisher
- Elsevier Inc
- DOI
- 10.1016/j.irfa.2024.103360
- ISSN
- 1057-5219
- eISSN
- 1873-8079
- Language
- English
- Date published
- 10/2024
- Academic Unit
- Finance
- Record Identifier
- 9984635133102771
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