You’re Fired! New Evidence on Portfolio Manager Turnover and Performance

We study managerial turnover for both internally managed mutual funds and those managed externally by subadvisors. We argue that turnover of subadvisors provides sharper tests and helps address several unresolved issues and puzzles from the previous literature. We find dramatically stronger inverse...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2015-08, Vol.50 (4), p.729-755
Main Authors: Kostovetsky, Leonard, Warner, Jerold B.
Format: Article
Language:English
Subjects:
Actively managed funds
Asset management
Investment strategies
Investors
Marketing
Money management
Mutual funds
Portfolio management
Quantitative analysis
Statistical significance
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Summary:We study managerial turnover for both internally managed mutual funds and those managed externally by subadvisors. We argue that turnover of subadvisors provides sharper tests and helps address several unresolved issues and puzzles from the previous literature. We find dramatically stronger inverse relations between subadvisor departures and lagged returns, and new evidence on how past flow predicts turnover. We find no evidence of improvements in return performance related to departures, but flow improvements are associated with departures of poor past performers. Our findings represent new evidence on how investors, sponsors, and boards learn about and evaluate mutual fund management performance.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109015000125