Outsourcing Mutual Fund Management: Firm Boundaries, Incentives and Performance

If two advisors are listed in Thomson Mutual Fund Holdings Database, but only one of the names does not match the name of the family complex, we identify that fund as a candidate for being outsourced. Note the limitation to “candidate” because advisors with different names may still be affiliated. We carefully do this matching by hand so as to account for issues such as slight variations of names for the same organization (e.g. Smith Barney Ltd versus Smith Barney) and to account for different divisions of the same company having different names (e.g. Morgan Stanley Japan is a part of Morgan Stanley). The latter issue is relevant mostly for categorizing international funds. Using this scheme alone, we identify roughly 56% of fund-year observations as being managed in-house and 44% of fund-year observations as candidates for being outsourced. 1