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Fund Flows, Manager Changes, and Performance Persistence

Bessler, W., Blake, D., Lückoff, P. and Tonks, I. (2018). Fund Flows, Manager Changes, and Performance Persistence. Review of Finance, 22(5), pp. 1911-1947. doi: 10.1093/rof/rfx017


Most empirical studies suggest that mutual funds do not persistently outperform an appropriate benchmark in the long run. We analyze this lack of persistence in terms of two equilibrating mechanisms: fund flows and manager changes. Using data on actively managed US equity mutual funds, we find that if neither mechanism is operating, winner funds (top-decile ranked in previous year) continue to significantly outperform loser funds (bottom-decile ranked in previous year) by 4.08 percentage points per annum. However, the difference between previous winner and loser funds declines to zero within one year if the two mechanisms are acting together. Thus, equity mutual fund out- and underperformance are unlikely to persist in well-functioning financial markets.

Publication Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Finance following peer review. The version of record Bessler, W., Blake, D., Lückoff, P. & Tonks, I. (2017). Fund Flows, Manager Changes, and Performance Persistence*. Review of Finance, is available online at:
Publisher Keywords: Mutual funds, Performance persistence, Fund flows, Manager changes
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Date available in CRO: 08 Jun 2017 07:45
Date deposited: 8 June 2017
Date of acceptance: 21 February 2017
Date of first online publication: 17 May 2017
Text - Accepted Version
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