Managers beyond borders: side-by-side management in mutual funds and pension funds

Abstract

Firms of collective investment industries, such as mutual and pension funds, are knowledge-intensive organizations that share managers between their multi-businesses to transfer the know-how of their employees and take advantage of the firm-specific human capital. This paper analyses the determinants and consequences of the simultaneous management (also called side-by-side or SBS management) of mutual and pension funds. In a sample of UK domestic equity mutual and pension funds, we find that managers are more likely to become SBS managers whether they belong to larger firms, have prior experience handling multiple funds, possess higher tenure, are female, and run smaller funds. Furthermore, SBS managers outperform their peers, showing the value of sharing human resources among diversified firms. Our results also show that holding similar portfolios between the funds of a manager may facilitate the multi-fund management. Top performers (SBS and non-SBS) present higher portfolio similarities than bottom performers, and higher fund similarities allow top managers to attract flows between their funds. However, top non-SBS managers erode performance due to higher portfolio similarities.