The Influence of Management Design on Mutual Fund Performance

Mutual funds are either run by a single manager or by a management team. Which management design is better has long been a topic of interest. In the early 2000s, the proportion of team-managed funds rose, but in 2007 it leveled off. Using the constant term from Carhart’s 4-factor model as a measure of management performance and data from Morningstar Inc., this paper adds to the discussion by incorporating another important dimension to this question, i.e., whether the fund changed its management company at the same time. The results indicate, among other things, that single-managed funds that changed management companies, on average, performed better than those that did not change. They also suggest that single-managed funds outperform team-managed funds