We propose a model of fund families in which trades of illiquid holdings can be crossed internally. In the model, cross-trading is the result of decentralized decisions by fund managers attempting to beat different style benchmarks, and increases with style diversity within the family. It benefits the whole family even in the absence of a family-level strategy. However, it is opportunistic: it allows managers to deviate excessively from their benchmarks, imposing heavy agency costs on investors. We provide empirical support for novel predictions of our model. Our results suggest that prior research may have understated the implications of interfund transactions.
Keywords: Mutual fund families, cross-trading, portfolio delegation, illiquidity.
JEL Classification: C61, D60, D81, G11, G12, G23
학회소식
[2015년 제 4차] The Invisible Hand of Internal Markets in Mutual Fu
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2016-01-08
