Monitoring Style Drift: Evidence from Equity Funds
45 Pages Posted: 16 Dec 2011
Date Written: December 16, 2011
This paper provides the first evidence that the quality of fund stewardship matters to fund style drift. Based on 435 equity funds from 2008 to 2011, we find a negative association between overall stewardship and the holding-based measure of style consistency and style dispersion in the size dimension. In comparison, stewardship component measures, including fees, regulatory history, manager compensation, manager ownership, board quality, and corporate culture are more significant in explaining the various dimensions of style drift we explored. Our analysis shows that managerial compensation and ownership have opposing effects on style drift and should therefore be treated separately in tests of fund stewardship.
Keywords: fund stewardship, mutual funds, style drift, Morningstar
JEL Classification: G34, G23
Suggested Citation: Suggested Citation