Employment Networks and Mutual Fund Performance

This paper explores the role of social networks in the portfolio allocation decisions and performance of mutual fund managers. Using a novel dataset, I examine the past employment networks of both mutual fund managers and firm executives. I find that fund managers place larger bets and perform significantly better on firms when they are connected to a senior executive of that firm through overlapping employment networks. A portfolio of connected stocks outperforms a portfolio of unconnected stocks by over 10% per year. The results suggest that fund managers may be benefiting from improved information secured as a result of their networks. *I would like to thank my adviser Lauren Cohen, along with John Beshears, Richard Townsend, Jeremy Hoon, Zach Frankel, and an anonymous private wealth management adviser.