Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 1, 2022 erstellt
Description:
I introduce a model where fund family advisors optimize family values by secretly transferring performances among affiliated funds (cross-fund subsidization). Funds’ performances depend on unobservable manager abilities and cross-fund subsidization. By cross-fund subsidization, advisors distort investors’ expectations of manager abilities and future returns, and influence investment flows to funds. In equilibrium, advisors direct subsidization from low-value funds to high-value funds, or from liquid funds to temporarily distressed funds. Subsidization receivers’ (providers’) flows decrease with providers’ (receivers’) performances, supported by my empirical findings. Due to belief distortions, investors over (under) invest in funds with negative (positive) net alphas, implying capital misallocations