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Fund manager allocation

Fang, Jieyan
Kempf, Alexander
Trapp, Monika
Year of Publication: 
Series/Report no.: 
CFR working paper 10-04
We study whether fund families efficiently allocate their fund managers to different market segments. Whether a fund manager can generate alpha simultaneously depends on her skills, and on the efficiency of the market segment in which she is employed. We show that in the more efficient investment grade bond fund market segment, fund managers cannot translate higher skill into higher fund alpha. In contrast, skilled managers can generate higher alpha in the less efficient high yield bond market segment. Fund families take this relation between skill and inefficiency into account and allocate their smartest managers to the least efficient market segment.
manager allocation
inefficient markets
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Document Type: 
Working Paper

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