Abstract
This paper shows that trust-building characteristics of fund managers affect purchase decisions of mutual fund investors. We exploit variation in fund managers’ prior affiliations with the well-trusted U.S. military institution and relate it to fund flows. Results show that funds with ex-military managers have 43% higher flows and grow by 14.4% p.a. faster relative to other funds. Investor inclination toward military managers strengthens with manager’s military involvement and its salience, and nationwide confidence in the military. Military managers’ superiority in competition for investor funds is not due to variation in fund or managerial attributes and robust to several alternative explanations.
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