چه کسی مدیر صندوق را برمی انگیزاند، سهامداران جدید و یا قدیمی؟

This study tests whether mutual fund shareholders continue to trade in response to fund returns after they make their initial investment in fund shares. It decomposes the relationship between fund returns and shareholder flow in a large, proprietary panel of all shareholder transactions in one midsize no-load mutual fund family. Results show that both new and old shareholders buy shares during periods of good returns; however, shareholder outflow is essentially unrelated to fund returns. This lack of a return-sell relationship is not driven by locked-in pension assets, shareholders’ ignorance of ongoing fund returns, or embedded capital gains. However, there is evidence that exchanges between equity funds in the family are related more strongly to returns of the destination fund than to returns of the origination fund. This may indicate that flow between equity mutual funds is driven by shareholders buying new funds rather than selling old funds. Supermarket shareholders are smart insofar as they exchange into funds that subsequently outperform their prior funds during their individual holding periods.

Agency problems are pervasive in economics. The literature analyzes a wide range of tools that stakeholders in various organizations deploy to protect their interests from self-serving managers. In the context of open-end mutual funds, Fama and Jensen (1983) suggest that the traditional tools are relatively unimportant because most of the shareholder-manager agency conflicts are resolved through shareholders’ transactions. Their argument is based on two key characteristics of mutual funds that differentiate funds from industrial companies and other organizations. First, shareholders directly affect the amount of assets the manager controls through their buys and sells. Second, the manager’s compensation is proportional to the fund’s total net assets and is, therefore, largely determined by shareholders’ individual buys and sells.2 In other words, Fama and Jensen (1983) argue that the agency problem in mutual funds can be solved if shareholders incentivize the manager to work hard by “rewarding” him with inflow after he posts good returns and “punishing” him with outflow after he posts poor returns.3 The mutual fund literature documents a strong link between shareholders’ transactions and the manager’s incentives: Ippolito, 1992, Patel et al., 1994 and Gruber, 1996, and others show that fund-level net shareholder flow is positively correlated with lagged fund returns. However, more recent research has just started to explore the fund-level relationship between gross shareholder flow and fund returns. Edelen, 1999, Bergstresser and Poterba, 2002, Goetzmann and Massa, 2003 and Del Guercio and Tkac, 2008, O’Neal (2004), and others suggest that although gross inflow is related to past returns, gross outflow is not. The asymmetric response to lagged returns is puzzling. This paper builds upon the existing gross-flow studies by decomposing, for the first time, the return-flow relationship within the fund using shareholder-level data that links together individual shareholders’ transactions through time, trade by trade. 4 The central question of interest is whether shareholders are equally responsive to returns after they make their initial investment in fund shares as they are at account opening. The first contribution of this paper is a comparison of shareholders’ account-opening buys with their post-opening buys. The second contribution is a series of tests that drill down to see why shareholders’ sells are unrelated to returns. Studying trading differences between “new” shareholders’ account-opening buys and “old” shareholders’ subsequent transactions will shed light on the incentives of fund managers. For example, if old shareholders neither buy nor sell in response to ongoing returns, the manager could choose investment policies designed to attract new shareholders—in an attempt to increase fund size and his compensation—even if those policies are costly for old shareholders. Along these lines, Brown et al. (1996) show that managers might alter portfolio risk in a way that harms old shareholders in an effort to increase their own compensation. Barclay et al. (1998) argue that fund managers make excessive distributions at the expense of old shareholders in an attempt to be more attractive to new shareholders. Christofferson and Musto (2002) suggest that the manager can profitably raise the fees that old shareholders pay in an existing fund while simultaneously opening a clone fund with lower fees (and a correspondingly higher expected return) for new shareholders.

Shareholders of open-end mutual funds hold a noteworthy option that is not available in most organizations studied by financial economists: they can add or remove assets at any time and at a fair price. This ability, if properly exercised, could substitute for regulatory oversight and alternative forms of governance (see Fama and Jensen (1983)). In order to understand whether fund shareholders’ trades incentivize the fund manager, this study tests whether shareholders continue to respond to returns after they make their initial investment in fund shares. Results show that “new” and “old” shareholders have a similar, positive response to lagged returns when buying fund shares. Additionally, the contemporaneous correlation of inflow from new and old shareholders is 0.94 over calendar quarters and 0.89 over calendar months. These results indicate that old shareholders are not locked into their current fund, buying additional shares without regard to ongoing returns. Instead, it appears that new and old shareholders face similar investment opportunity sets: when new shareholders buy shares, so, too, do old shareholders. In stark contrast to the buy results, the sell evidence shows that returns do not affect the shareholders’ decision to remove assets from the fund. This asymmetric buy-sell relationship is puzzling. First, why are shareholders unwilling to use the information in poor returns as a signal to sell fund shares when they are anxious to use the information in good returns as a signal to buy fund shares? Second, if poor returns do not cause sells, what does? The data reject the following three potential explanations of the buy-sell asymmetry: pension accounts are locked into an inferior menu of funds; shareholders do not pay attention to the fund’s ongoing returns and, hence, do not know when the fund performs poorly; and accrued taxes make shareholders with embedded gains unwilling to remove assets. The data do not reject a fourth explanation: shareholders sell their current fund in order to reinvest the proceeds in a better-performing fund. This explanation is consistent with the hypothesis that shareholders, rather than placing transactions in isolation, strategically sell assets in order to buy other, better-performing assets. Exploring shareholders’ transitions from one asset to another as they dynamically update their portfolios may be a profitable avenue for future research. There is also evidence of shareholder heterogeneity. For example, despite the fact that shareholders, in the aggregate, do not sell in response to poor returns, some shareholder groups do. In particular, the results show that retail households sell when the fund performs poorly. This (and another data sampling issue) may explain why Ivković and Weisbenner (2006) report that mutual fund shareholders, as a group, sell poor returns while other studies report the opposite result. This paper also demonstrates that transactions from shareholders who trade frequently are not related to returns. Instead, these shareholders’ transactions might be motivated by liquidity needs that are unrelated to fund performance. This may not be surprising because no-load mutual funds are a low-cost investment vehicle through which shareholders can efficiently ameliorate small or recurring liquidity shocks. This contrasts with households who frequently trade stocks—their trades appear to be motivated by returns (see, for example, Barber and Odean (2000)). Taken together, the results suggest that shareholder flow is an incomplete incentive-alignment mechanism. Although aggregate shareholder inflow rewards the manager after periods of good returns, aggregate outflow does not punish him after periods of poor returns. Future research could focus on how other incentive-alignment mechanisms (such as boards of directors) respond to periods of poor returns. Of course, it is possible that portfolio managers are adequately incentivized through inflow. Because the mutual fund industry is growing rapidly, funds that are not keeping up are being punished: they lose their relative ranking according to assets under management, and they are unable to capture larger economies of scale in fund distribution and other shareholder services.18 The typical shareholder exchange between two funds in the mutual fund family is not wealth enhancing. The fund that is bought is as likely to underperform as outperform the fund that is sold. However, shareholders who invest through mutual fund supermarkets are successful in over two-thirds of their exchanges. Because these findings are based on the individual shareholder’s actual holding period of fund shares, they make a contribution to the “smart money” literature that examines whether mutual fund shareholders select funds that have good future performance (see Gruber, 1996, Zheng, 1999 and Frazzini and Lamont, 2008). This paper studies the return-flow relationship in mutual funds, shedding new light on how closely fund shareholders watch the fund managers. However, the findings are grounded in the returns and flow of one mutual fund family. This raises the question of whether the documented return-flow relationships are different from those found in other families. Only future research can definitively address this concern. Nevertheless, the aggregate behavior of shareholders in this family is remarkably similar to that reported in the existing literature, including Bergstresser and Poterba (2002, p. 410), Del Guercio and Tkac (2008, Table 1), Greene and Hodges (2002, Table 3), and Sirri and Tufano (1998, Fig. 1). This suggests that the main results might generalize to shareholders in other mutual fund families. In fact, the database used in this study is tilted slightly toward more return-sensitive shareholders than are found in the typical fund (see Del Guercio and Tkac (2008)). Thus, the main results of this paper might actually be understated.