Wharton Pension Research Council Working Papers

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Working Paper

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This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own affiliated funds. Using a hand-collected dataset on retirement investment options, we show that affiliated mutual funds are less likely to be removed from and more likely to be added to a 401(k) menu. In addition, fund deletions and additions are less sensitive to prior performance for affiliated than for unaffiliated funds. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that this favoritism is not information driven.


401(k), pension plans, trustee, favoritism, mutual funds

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Copyright/Permission Statement

The views expressed in this paper are those of the authors and do not reflect the views of the Board of Governors of the Federal Reserve System, its staff members, the Wharton School, or the Pension Research Council. © 2015 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


We thank Pierluigi Balduzzi, Keith Brown, Lauren Cohen, Van Harlow, Frank de Jong, Olivia Mitchell, Joshua Pollet, Jonathan Reuter, Oleg Rytchkov, Paul Schultz, Laura Starks, Steve Utkus, Marno Verbeek, Scott Yonker, and seminar participants at Arizona State University, the California State University Fullerton, DePaul University, Emory University, the Federal Reserve Board, George Washington University, Indiana University, INSEAD, Loyola University in Chicago, McMaster University, Securities Exchange Commission, Southern Methodist University, Stanford University, University of Alabama, University of California at Davis, University of Georgia, University of Kentucky, University of Illinois at Urbana-Champaign, University of Virginia, Yale University, the American Economic Association Meeting in San Diego, the European Household Finance Conference in Stockholm, the FIRS Conference in Croatia, the Humboldt University Conference on Recent Advances in Research on Mutual Funds, the IU-Note Dame-Purdue Summer Symposium, the BNER Conference on Personal Retirement Challenges, the NETSPAR spring workshop, the Nova Finance Conference on Pensions and Retirement, the Second MSUFCU Conference on Financial Institutions and Investments at Michigan State University, and the Society for Financial Studies Cavalcade in Miami for helpful comments. We also thank NETSPAR, Indiana University, TIAA-CREF (PRCBoettner Grant Award), and the University of Texas at Austin for financial support. Clemens Sialm also thanks the Stanford Institute for Economic Policy Research for financial support during his Sabbatical leave.

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Date Posted: 12 March 2019