Eduard Inozemtsev1
  • 1 Gaidar Institute for Economic Policy, 3-5, Gazetny lane., Moscow, 125009, Russian Federation

Backstage Games of Management Companies

2017. Vol. 21. No. 2. P. 283–311 [issue contents]

This paper provides a literature review on different strategies of mutual fund management companies. Most of the considered strategies are used to increase total net assets under management. These include: fee competition, changing fund names, fund incubation, favoritism, mergers and acquisitions of management companies and their parts. There are two main goals of this article. The first one is a warning of potential investors about additional risks of investing in mutual funds. The second goal is a consolidation of different scientific facts for the regulator about peculiarities of management company’s strategic development. Restricting or prohibiting the most of the considered strategies will help to protect the interests of investors and make investing more transparent in terms of risks.

I also examine the possibility of employing the favoritism strategies in Russia. In summary, this question is remained open. On the one hand, possibility of employing IPO allocation strategy is restricted. On the other hand, presence of opposite trades is possible. According to legislation, the opposite trades in Russia can be done either on stock exchange or as an OTC deal. In the latter case a convertibility of shares of two funds is the only restriction. According to the results, OTC deal price can strongly deviate from stock exchange price of an instrument. The presence of this deviation can be weakly explained by variation of market risk, but I was not able to find any relation between the size of deviation and the market risk. This means that OTC deals can be used as a mechanism of cross-subsidization in Russia.
Citation: Inozemtsev E. (2017) Zakulisnye igry upravlyayushchikh kompaniy [Backstage Games of Management Companies]. HSE Economic Journal , vol. 21, no 2, pp. 283-311 (in Russian)
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