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Journal of Finance Vol. 68 No. 1 2013

Conflicting Family Values in Mutual Fund Families

Utpal Bhattacharya; JUNG H. LEE; Veronika Krepely Pool1,2,3

1 University of Illinois Chicago · 2 Honeywell (United States) · 3 University of Hong Kong

Abstract

We analyze the investment behavior of affiliated funds of mutual funds (AFoMFs), which are mutual funds that can only invest in other funds in the family, and are offered by most large families. Though never mentioned in any prospectus, we discover that AFoMFs provide an insurance pool against temporary liquidity shocks to other funds in the family. We show that, though the family benefits because funds can avoid fire sales, the cost of this insurance is borne by the investors in the AFoMFs. The paper thus uncovers some of the hidden complexities of fiduciary responsibility in mutual fund families.

DOI
10.1111/j.1540-6261.2012.01797.x
Volume
68
Issue
1
Pages
173-200
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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