Asset management within commercial banking groups: international evidence

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Abstract

We study the performance of equity mutual funds run by asset management divisions of commercial banking groups using a worldwide sample. We show that bank-affiliated funds underperform unaffiliated funds by 92 basis points per year. Consistent with conflicts of interest, the underperformance is more pronounced among those affiliated funds that overweight the stock of the bank's lending clients to a great extent. Divestitures of asset management divisions by banking groups support a causal interpretation of the results. Our findings suggest that affiliated fund managers support their lending divisions’ operations to reduce career concerns at the expense of fund investors.

Original languageEnglish
Pages (from-to)2181-2227
Number of pages47
JournalJournal of Finance
Volume73
Issue number5
DOIs
Publication statusPublished - 1 Oct 2018

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