What They Did in Their Previous Life: The Investment Value of Mutual Fund Managerss Experience Outside the Financial Sector

Abstract

We document that prior work experience of mutual fund managers outside the asset management industry has investment value in that it provides managers with a stock picking and industry timing advantage. Fund managers’ stock picks from industries where they previously worked outperform those from their non-experience industries by about three percent annually. Moreover, fund managers are better at timing the returns of their experience industries than those of other industries. Finally, the investment value of managers’ prior experience is greater when it is gained in hard-to-value industries, and it increases with the extent of experience.