Are mutual fund manager skills transferable to private funds?

Abstract

We evaluate how work experience in mutual funds affects manager skills after they switch to private funds. Using a proprietary Chinese private fund database from 2012 to 2016, we document that, despite their work experience in mutual funds, switched private fund managers significantly underperform compared with their peer managers in private funds. In particular, the investment skills of smart managers with superior track records in mutual funds deteriorate after the career switch. Moreover, the reduction in skills of smart managers is mainly attributable to the loss of corporate research support in private funds. Our findings demonstrate that the skill sets of mutual fund managers are hardly transferable to the private fund industry.