From the dean >
BBA program soars >
Bonding on the slopes >
Meet the professor >
Inquiring minds >
Alumni, faculty maintain worldwide connections >
Making diversity count >
Program spurs entrepreneur >
GMSC presentations >
Building alliances >
What ever happened to...>
In the news >
Doctoral student "inspires" >
Kudos >
K@Emory celebrates fifth year >
New faculty releases >
Park project aid city of Atlanta >
BBAs mine information gold >
Real deal on work/life balance >


Real estate careers >


Alumni news >
Mentors meet ‘mentees’ >
First international board >
2006 class gifts >
Muta Issa ’04EMBA >
Class Notes >
Igor Saveliev ’94MBA >
WEMBA class endows
nonprofit scholarship
>
Marc Forest ’85BBA >
Intercontinental Hotels Group >
Remembering
Bart Herbert ’92EMBA >

Library fills research gap >
Art and business merge
at Goizueta>


Archived issues >

 

Inquiring minds:
Are Fund Managers Essential to Performance?

Klaas Baks is an assistant professor of finance at Goizueta Business School. In his latest paper, “On the Performance of Mutual Fund Managers,” currently under review at the Journal of Finance, Baks seeks to separate the fund manager from the fund organization as a means of analyzing performance to see to what extent managers determine the performance of a mutual fund.

What motivates you to separate the performance of the fund manager and the organization?

There are reasons to believe that both are important for the performance of the fund. The difficult thing is that typically performance is seen as a joint output of both managers and funds. Think about a tennis game in which you would only observe doubles play. If I only see doubles play, then it’s hard for me to assign which player is good and which is not because I only observe the team. It may be one or the other. Most of the studies have used mutual funds and mutual fund managers equivalently even though they are not the same entity. This is the first paper that disentangles that.

How do you capture performance separately?

I construct a model that separates managers from funds by tracking mutual fund managers as they move from firm to firm. The idea is that if managers are the key determinant of performance then performance should “stick” to them when they change firms. The study examines the performance of mutual fund managers using a newly constructed database that tracks 2,086 managers of domestic diversified equity mutual funds during their careers. The 2,086 managers in the sample manage 1,602 funds with a total of 6,287 fund years during the period from January 1992 to December 1999.

Are managers, who often are elevated to star status, the key determinant in a fund’s performance?

On average, about 70 percent of differences between the performances of various funds can be attributed to the fund companies, and just 30 percent to the managers. The layman conclusion here is that the fund is more important than the manager for performance. For some people that is fairly surprising because we tend to think that the guy who makes the investment decisions must be the most important determinant of fund performance. That happens not to be the case.

Diana Drake


^ top