No Conflict of Interests to Declare – a Study of Individual-Controlled Funds in China

We study a group of mutual funds in China that are issued and controlled by individuals, so-called “individual-controlled funds (ICF)”. Unlike funds affiliated with other organizations, ICF managers are arguably free of the influence of potential conflicts of interest and should see the pursuit of performance as their sole objective. Consistent with this notion, we find ICF managers outperform their peers by exhibiting superior skills. In addition, we document the learning behavior of non-ICF peer funds whereby other funds mimic ICF trading strategies. This is evidence of the positive externality produced by ICFs