Management sub-advising in the mutual fund industry

David Moreno, Rosa Rodríguez, Rafael Zambrana

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)


This is a study of how contractual mechanisms can mitigate agency conflicts in sub-advised mutual funds. Sub-advising contracts allow fund families to expand their product offerings to include new investment styles and thereby gain market share. We show that costly contractual arrangements, such as co-branding, multi-advising, and performance-based compensation, can mitigate agency conflicts in outsourcing and protect investors from potential underperformance. Fund families will find it cost-effective to implement such incentive mechanisms only when investors are sophisticated in assessing manager skill. The findings help to explain why a large percentage of fund families outsource their funds to advisory firms.

Original languageEnglish
Pages (from-to)567-587
Number of pages21
JournalJournal of Financial Economics
Issue number3
Publication statusPublished - 1 Mar 2018


  • Agency issue
  • Fund performance
  • Incentive contracts
  • Management company
  • Market share
  • Mutual funds
  • Outsourcing
  • Sub-advisor


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