Do Fund Families Subsidize Team-managed Funds?

In recent years, there have been two major trends in our mutual fund industry. The first one is that the fund family organization has become the main organization mode in fund industry and the second one is that team-managed funds have become more and more popular. In this paper, we try to combine these two trends and study whether fund family would subsidize team-managed funds more than single-managed funds.Specifically, this paper attempts to answer the following three questions: Does fund family indeed subsidize team-managed funds more than single-managed funds? If yes, what type of channels would fund family use to do favoritism to team-managed funds? And what are the results of the fund family's favoritism to team-managed funds? Is there any difference between team-managed fund and single-managed fund in performance, risk and cash flow?The data we used in the paper come from Wind database and contain all mutual common stock funds sample from 2004 to 2014 in China. By empirical analysis we have drawn the following conclusions:First, from the perspective of the performance difference between team-managed funds and single-managed funds, we find some indirect evidence of fund family's favoritism to team-managed funds. Results shows that the performance difference between team-single funds which belong to the same fund family is more than the performance difference between team-single funds belonging to different fund families, which means some of these performance difference between team-managed funds and single-managed funds comes from the active management of fund family. But we cannot conclude that this kind of active management of fund family is one type of fund family's favoritism to team-managed funds.Second, by studying channels which fund family might use to subsidize team-managed funds, this paper finds the direct evidence of fund family's favoritism to team-managed funds. We mainly investigate two types of subsidization channels which fund family might use. The first one is the allocation of IPO projects. The second one is the appointment of star fund managers. This paper finds that fund family would allocate more IPO projects and appoint more star fund managers to funds managed by a team. These results provide direct proof that fund family subsidize team-managed funds more than single-managed funds.In the end, this paper test the results of the fund family's favoritism to team--managed funds and compare the difference between team-managed funds and single-managed funds in performance, risk and cash flow. There is no significant performance difference between these two types of funds. But the risk of team-managed funds is significantly lower than that of single-managed funds. And funds managed by a team can attract more cash flow than fund managed by single manager.