We find evidence that conflicts of interest are pervasive in the asset management business owned by investment banks. Using data from 1990 to 2008, we compare the alphas of mutual funds, hedge funds, and institutional funds operated by investment banks and non-bank conglomerates. We find that, while no difference exists in performance by fund type, being owned by an investment bank reduces alphas by 46 basis points per year in our baseline model. Making lead loans increases alphas, but the dispersion of fees across portfolios decreases alphas. The economic loss is $4.9 billion per year.
Berzins, J., Liu, C. H., & Trzcinka, T. (2013). Asset management and investment banking [Electronic version]. Retrieved [insert date], from Cornell University, School of Hotel Administration site: http://scholarship.sha.cornell.edu/articles/925