The Performance of Mutual Funds That Close to New Investors

VOL. 6, NO. 2, WINTER 2003/2004 47 Abstract We examined mutual funds that closed to new investors for the period 1995 to 2001. We found that closed funds outperformed their peers before closing and that this superior performance decreased after the fund closed. We also investigated the performance of funds that reopened, a sample never before examined. We found that this group of funds performed similarly to those that didn’t reopen, outperforming their peers before closure but underperforming while closed. We also found that the funds that reopened performed significantly worse after reopening than before closing. While our sample was small, these results suggest that funds that close to new investors do not maintain the competitive advantage they seek to protect by closing. They also are unable to recover their advantage by reopening.