What Do Consumers' Fund Flows Maximize? Evidence from Their Brokers' Incentives

Susan Christoffersen, Richard Evans, David K. Musto

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Abstract

We ask whether mutual funds’ flows reflect the incentives of the brokers intermediating them. The incentives we address are those revealed in statutory filings: the brokers’ shares of sales loads and other revenue, and their affiliation with the fund family. We find significant effects of these payments to brokers on funds’ inflows, particularly when the brokers are not affiliated. Tracking these investments forward, we find load sharing, but not revenue sharing, to predict poor performance, consistent with the different incentives these payments impart. We identify one benefit of captive brokerage, which is the recapture of redemptions elsewhere in the family.
Original languageEnglish
JournalJournal of Finance
Volume68
Issue number1
Pages (from-to)201-235
ISSN0022-1082
DOIs
Publication statusPublished - Feb 2013

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