Mutual Fund Strategy: Swing for the Fences or Bat for Average

John Chalmers and Arash Dayani

♦ We document two mutual fund strategies: “Swinging for the Fences” (SF), where managers hold stocks with extreme style-adjusted returns on either tail of the return distribution, and “Batting for Average” (BA), where managers seek stocks with consistent moderate performance. These strategies are persistent and deliberate. Existing measures of active management and factors don’t explain the strategies. SF attracts more flow, particularly when funds mention specific stock holdings in N-CSR. SF funds charge higher fees and hold riskier portfolios. They fail to deliver higher risk-adjusted returns. SF strategies are not present in passive funds, supporting that SF and BA are intentional.

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