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Team Management has Positive Effect on Fund Performance

A new academic paper examines the effects of team portfolio management on fund performance.  The paper finds that funds managed by teams of portfolio managers have higher risk adjusted returns than funds run by a single portfolio manager.  According to the paper, teams improve fund performance by 37 – 46 basis points.

The paper also explores the optimal team characteristics.  It finds that teams of three typically add the biggest contributions to performance.  In addition, the paper finds that “large social category diversity” harms fund performance.  Finally, the research shows that location matters, with teams in financial centers outperforming those located elsewhere.

The paper examines risk of the funds, and notes that the risk exposure does not vary significantly between team managed funds and those run by a single manager.  However, the paper does find that turnover and fees tend to be lower for team managed funds.