Dissimilarities Between Domestic and Foreign Money Management at Home: Evidence from Italy

Dissimilarities Between Domestic and Foreign Money Management at Home: Evidence from Italy Reasons of financial sophistication of investment strategies and institutional biases lead to the assumption that money managers may behave differently from one country to another. Using data from Italy, this study investigates whether domestic and foreign mutual funds differ in terms of management approaches, and if this dissimilarity translates into performance patterns. Over the period 1998-2002, we find that much of the difference between domestic and foreign funds is explained by the different tax systems. This asymmetry between the two groups also affects performance, which is probably the reason behind the popular perception that foreigners are more skilful than domestic managers. After controlling for the taxation factor, we show, in fact, that the performance levels of Italian funds are virtually indistinguishable from the returns of their foreign counterparts.