Abstract
Previous research has concluded that mutual funds' clients do have asymmetric performance reactions. Such behavior gives the fund manager the opportunity to optimize the fund's own interests. Using a unique database from a financial system wherein commercial interests, investment banking and portfolio management are concentrated in the same banking group, we show that mutual funds tend to exhibit biased portfolios, i.e., financial assets of the group's parent company outweigh other financial asset holdings. This cannot be explained by performance, risk or securities' characteristics, and is consistent with the hypothesis of the existence of self-interest on mutual fund management.
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