Mutual fund shareholder letters: flows, performance, and managerial behavior

  • Fund companies regularly send shareholder letters to their investors. We use textual analysis to investigate whether these letters’ writing style influences fund flows and whether it predicts performance and investment styles. Fund investors react to the tone and content of shareholder letters: A less negative tone leads to higher net flows. Thus, fund companies can use shareholder letters as a tactical instrument to influence flows. However, at the same time, a dishonest communication that is not consistent with the fund’s actual performance decreases flows. A positive writing style predicts higher idiosyncratic risk as well as more style bets, while there is no consistent predictive power for future performance.

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Author:Alexander HillertGND, Alexandra Niessen-RuenziGND, Stefan RuenziORCiDGND
Series (Serial Number):SAFE working paper (380)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/02/17
Tag:Fund Flows; Investment Styles; Shareholder Letters; Textual Analysis
Edition:January 2023
Page Number:111
We are grateful for financial support from the Julius Paul Stiegler Memorial Foundation.
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:G Financial Economics / G1 General Financial Markets / G11 Portfolio Choice; Investment Decisions
G Financial Economics / G2 Financial Institutions and Services / G23 Pension Funds; Other Private Financial Institutions
Licence (German):License LogoDeutsches Urheberrecht