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The Performance of Local versus Foreign Mutual Fund Managers


  • We thank John Doukas (the editor) an anonymous referee, Christopher Blake, Rob Bauer, Jean Dermine, Bart Frijns, William Goetzmann, Kees Koedijk, Stephen Ross, Stefan Ruenzi, Peter Schotman and participants of the 2002 BSI Gamma Foundation conference, the 2003 FMA-Europe Meeting in Dublin and the 2003 Meeting of the EFMA in Helsinki for helpful comments. Financial support from the BSI Gamma Foundation is gratefully acknowledged. All remaining errors are the sole responsibility of the authors. The views expressed in this paper are not necessarily shared by De Lage Landen (DLL) and AZL.


In this paper we examine the performance of US equity funds (locals) versus UK equity funds (foreigners) also investing in the US equity market. Based on informational disadvantages one would expect the UK funds to under-perform the US funds, especially in the research-intensive small company market. After controlling for tax treatment, fund objectives, investment style and time-variation in betas, we do not find evidence for this. In the small company segment we even find a slight out-performance for UK funds compared to US funds. Finally we observe a home bias in the UK portfolios, which is partly attributable to UK funds investing in cross-listed stocks in the USA.

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