Family Matters: Rankings Within Fund Families and Fund Inflows

Authors

  • Alexander Kempf,

    1. The authors are from the Department of Finance, University of Cologne and the Centre for Financial Research (CFR) Cologne, Germany. They thank Vikas Agarwal, Amanda Adkisson, Alexandra Niessen, Peter Pope (editor), Laura Starks, Russ Wermers, Youchang Wu, and participants at the FMA Annual and European Meetings (2004), the European Financial Management Association Meetings (2004), and the Xfi Conference on Fund Management (2006) for helpful comments. They are especially grateful to an anonymous referee. All remaining errors are the authors' own.
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  • Stefan Ruenzi

    Corresponding author
    1. The authors are from the Department of Finance, University of Cologne and the Centre for Financial Research (CFR) Cologne, Germany. They thank Vikas Agarwal, Amanda Adkisson, Alexandra Niessen, Peter Pope (editor), Laura Starks, Russ Wermers, Youchang Wu, and participants at the FMA Annual and European Meetings (2004), the European Financial Management Association Meetings (2004), and the Xfi Conference on Fund Management (2006) for helpful comments. They are especially grateful to an anonymous referee. All remaining errors are the authors' own.
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* Address for correspondence: Stefan Ruenzi, Department of Finance, University of Cologne, Albertus-Magnus-Platz, 50923 Koeln, Germany. e-mail: ruenzi@wiso.uni-koeln.de

Abstract

Abstract:  This paper examines the influence of the position of a fund within its family on its subsequent net-inflows. Our empirical study of the US equity mutual fund market shows that reaching a top position within the family leads to large inflows. These inflows accrue beyond those expected, given the performance of the fund in its respective market segment. The effect is much stronger in large families than in small families. We also find that inflows significantly increase if a fund moves into the top positions within its family from one year to another. These results lead to competition within the fund family and to important risk taking incentives for fund managers.

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