Discussion paper

DP10465 Subcontracting in International Asset Management: New Evidence on Market Integration

We study the decisions of international asset managers to outsource portfolio management of their funds and we link these decisions to market integration. Using a structural model of selfselection, we endogenize the decision to outsource in a comprehensive sample of international mutual funds and identify both performance and non-performance related determinants of outsourcing. Outsourcing fund management generates net positive gains to fund families of around 8-17 bp per month despite the ex-post underperformance of outsource funds relative to inhouse funds. Then, we establish that the performance improvements from outsourcing are directly related to segmentation in the underlying asset markets.

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Citation

Massa, M (2015), “DP10465 Subcontracting in International Asset Management: New Evidence on Market Integration”, CEPR Press Discussion Paper No. 10465. https://cepr.org/publications/dp10465