Better than the original? The relative success of copycat funds

摘要

We construct hypothetical copycat funds to investigate the performance of free-riding strategies that duplicate the disclosed asset holdings of actively managed mutual funds. On average, copycat funds are able to generate performance that is comparable to their target mutual funds, taking into account transaction costs and expenses. However, their relative success increased significantly after 2004 when the SEC imposed quarterly disclosure regulations on all mutual funds. We also find substantial cross-sectional dispersion in the relative performance of copycat funds. Free-riding on the portfolios disclosed by past winning funds and funds that disclose representative holdings generates significantly better performance net of trading costs and expenses than the vast majority of mutual funds. The results indicate that free-riding on disclosed fund holdings is an attractive strategy and suggest that mutual funds can suffer from the information disclosure requirements.