Competition of socially responsible and conventional mutual funds and its impact on fund performance

This paper examines the impact of both socially responsible (SR) and conventional entrant funds on SR incumbent funds using an overlap in portfolio holdings to measure the impact of competition in the US mutual fund industry. This paper’s findings indicate that over the past decade the increase in c...

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Bibliographic Details
Published in:Journal of banking & finance 2014-07, Vol.44, p.160-176
Main Authors: In, Francis, Kim, Martin, Park, Raphael Jonghyeon, Kim, Sangbae, Kim, Tong Suk
Format: Article
Language:English
Subjects:
Capital flow
Capital movement
Competition
Impact analysis
Investment trusts
Market analysis
Mutual funds
Portfolio analysis
Portfolio performance
Social investing
Socially responsible investing
Studies
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Summary:This paper examines the impact of both socially responsible (SR) and conventional entrant funds on SR incumbent funds using an overlap in portfolio holdings to measure the impact of competition in the US mutual fund industry. This paper’s findings indicate that over the past decade the increase in competition from SR entrants has been associated with an increase in fees but not in capital flow. Moreover, our results show that the increase in the number of SR fund entrants does not have a negative impact on fund performance. This finding implies that despite the significant increase in the number of SR funds entering the market, open and free competition fosters the performance of SR fund participants. Our study concludes that despite the recent growth in the number of SR funds, the SR mutual fund market does not exhibit the key features of a competitive market.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2014.03.030