New Working Paper on the role of traders in fund management

February 9, 2024

In a current Working Paper, Gjergji Cici (University of Kansas), Philipp Schuster and Franziska Weishaupt study the role of traders in fund management.

Mutual fund families are increasingly assigning traders to manage corporate bond mutual funds.Using this setting to study the role of traders in investment management, we document that trader managers identify and exploit short-term trading opportunities at lower transaction costs. These skills are particularly valuable during periods of market stress. Moreover, trader managers exhibit sophisticated risk management behavior: They reduce credit risk during periods of market stress and take more maturity risk during periods of large interest ratefluctuations, while holding portfolios with greater convexity. The combination of these skills produces relative outperformance during periods of large interest rate fluctuations.

You can find the full Working Paper here.

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