The Determinants of Investment Flows: Retail Versus Institutional Mutual Funds
Posted: 21 Jul 2013 Last revised: 3 Dec 2015
There are 2 versions of this paper
The Determinants of Investment Flows: Retail versus Institutional Mutual Funds
Date Written: March 12, 2015
Abstract
This paper compares the fund selection criteria used by investors in retail mutual funds with the criteria of investors in institutional mutual funds. We find that, compared with investors of retail mutual funds, clients of institutional mutual funds use more quantitatively sophisticated criteria such as risk-adjusted return measures and tracking error, demonstrate stronger momentum-driven and herding behaviors, and are less sensitive to fund expense ratio. In addition, we provide evidence that the previously-documented convex form of the flow-performance relationship is driven mostly by retail funds. Finally, we find that flow patterns of both fund types vary across the business cycle.
Keywords: mutual funds, institutional investors, retail investors, institutional funds, retail funds, investment decisions, fund flows, performance evaluation, business cycle
JEL Classification: G02, G11, G23
Suggested Citation: Suggested Citation
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