How does human capital affect the performance of small and mid‐cap mutual funds?

This study sets out to examine whether small and mid‐cap fund performance is related to fund manager human capital characteristics including tenure, investment experience, education (MBA designation), professional training (CFA), and gender.

Based on a sample of 1,004 small and mid‐cap equity funds identified on the Morningstar database as of 31 December 2005, several statistical tests were applied which consider fund performance, risk, expenses, and turnover simultaneously.

Depending on the benchmark, an optimal size of managed mutual funds is determined that ranges between $US1.43 billion and $US3.89 billion.

The results suggest that there are some systematic cross‐sectional differences in fund performance that can be attributed to differences in managerial human capital characteristics.