Mutual Fund Performance and the Incentive to Generate Alpha

This paper was previously titled "Mutual Fund Performance and the Incentive to Invest in Active Management." We would like to thank an anonymous referee, an anonymous associate editor, John Campbell, Larry Dann, Robin Greenwood, Ro Gutierrez, Campbell Harvey (editor), Edie Hotchkiss, Abhiroop Mukherjee, Jeff Pontiff, Antoinette Schoar, Phil Strahan, Laurens Swinkels, Paula Tkac, Hai Tran, Peter Tufano, Eric Zitzewitz, and seminar partici-pants at Harvard University, the 2010 NBER Summer Institute Household Finance Workshop, the 2011 Boston College Center for Asset Management Conference on Financial Markets, and the 2012 HKUST Symposium on Household Finance for helpful comments. Del Guercio would like to acknowledge support from the Finance and Securities Analysis Center at the University of Oregon. We thank Lauren Beaudette and Hai Tran for providing excellent research assistance and Deb Wetherbee at Financial Research Corporation for generously providing data on mutual fund distribution channels. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• December 5, 2011