Get access

Attracting Flows by Attracting Big Clients




    Search for more papers by this author
    • Lauren Cohen is from Harvard Business School and NBER. Breno Schmidt is from Marshall School of Business at the University of Southern California. The authors thank Andrew Ang, Nick Barberis, Jeff Brown, Joe Chen, Judy Chevalier, James Choi, Sean Collins, Doug Diamond, Marty Gruber, Michael Hadley, Cam Harvey, Gur Huberman, Wei Jiang, Chris Jones, Owen Lamont, Dong Lou, Pedro Matos, Massimo Massa, John Matsusaka, Mike McNamee, Toby Moskowitz, Federico Nardari, L̆ubos̆ Pástor, Nagpurnanand Prabhala, Josh Rauh, Brian Reid, Jon Reuter, Matt Richardson, Jeff Wurgler, an associate editor, and an anonymous referee for their helpful discussions and suggestions. We are also grateful to seminar participants at Chicago, Northwestern, Yale, USC, the NYU/NY Fed Conference on Financial Intermediation, the FRA Conference, the EFA 2006 Meetings in Zurich, and the WFA 2007 Meetings in Big Sky for useful comments. Conversations with the Investment Company Institute and participants at the Yale Mutual Fund Directors Forum were also very helpful.


We explore a new channel for attracting inflows using a unique data set of corporate 401(k) retirement plans and their mutual fund family trustees. Families secure substantial inflows by being named trustee. We find that family trustees significantly overweight, and are reluctant to sell, their 401(k) client firm's stock. Trustee overweighting is more pronounced when the relationship is more valuable to the trustee family, and is concentrated in those funds receiving the greatest benefit from the inflows. We quantify this flow benefit and find that inclusion in the 401(k) plan has an economically and statistically large, positive effect on inflows.