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Article | Journal of Finance | October 2009

Attracting Flows by Attracting Big Clients

by Lauren Cohen and Breno Schmidt

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Abstract

We explore a new channel for attracting inflows using a unique dataset of corporate 401(k) retirement plans and their mutual fund family trustees. Families secure substantial inflows by being named the trustee of a 401(k) plan. We find that family trustees significantly overweight their 401(k) client firm's stock. Trustee overweighting is more pronounced when the relationship is more valuable to the trustee family, and it is concentrated in those funds that receive the greatest benefit from the inflows. When other mutual funds are selling the client firm's stock, the trustee does the opposite and significantly increases its holdings of the client. This overweighting is not explained by superior information. We also quantify the flow benefit to the trustee mutual funds of being included in the client firm's 401(k) plan and find that this inclusion has an economically and statistically large, positive effect on inflows.

Keywords: Value; Information; Investment Funds; Stocks; Relationships; Financial Services Industry;

Format: Print 28 pages Find at Harvard Read Now

Citation:

Cohen, Lauren, and Breno Schmidt. "Attracting Flows by Attracting Big Clients." Journal of Finance 64, no. 5 (October 2009): 2125–2151. (Winner of the Barclays Global Investors Best Paper Prize, Asset Allocation Symposium, European Finance Association 2006. Winner of the Society of Quantitative Analysts Award, Best Paper in Quantitative Investments, Western Finance Association 2007.)

About the Author

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Lauren H. Cohen
L.E. Simmons Professor of Business Administration
Finance
Entrepreneurial Management

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More from the Author

  • Article | Management Science | December 2019

    Patent Trolls: Evidence from Targeted Firms

    Lauren Cohen, Umit Gurun and Scott Duke Kominers

    We provide the first large-sample evidence on the behavior and impact of nonpracticing entities (NPEs) in the intellectual-property space. We find that, on average, NPEs appear to behave as opportunistic “patent trolls.” NPEs sue cash-rich firms and target cash in business segments unrelated to alleged infringement at essentially the same frequency as they target cash in segments related to alleged infringement. By contrast, cash is neither a key driver of intellectual-property lawsuits by practicing entities (e.g., IBM and Intel) nor of any other type of litigation against firms. We find further suggestive evidence of NPE opportunism: targeting of firms that have reduced ability to defend themselves, repeated assertions of lower-quality patents, increased assertion activity nearing patent expiration, and forum shopping. We find, moreover, that NPE litigation has a real negative impact on innovation at targeted firms: firms substantially reduce their innovative activity after settling with NPEs (or losing to them in court). Meanwhile, we neither find any markers of significant NPE pass-through to end innovators nor of a positive impact of NPEs on innovation in the industries in which they are most prevalent.

    Keywords: Patent trolls; patents; innovation; Patents; Lawsuits and Litigation; Ethics; Innovation and Invention;

    Citation:

    Cohen, Lauren, Umit Gurun, and Scott Duke Kominers. "Patent Trolls: Evidence from Targeted Firms." Management Science 65, no. 12 (December 2019): 5461–5486. (Cited in the United States Federal Trade Commission Report on Patent Assertion Entities, 2016.)  View Details
    CiteView DetailsSSRNFind at Harvard Related
  • Teaching Note | HBS Case Collection | October 2019

    ClearLife: From Prospect to Platform

    Alexander Braun, Lauren H. Cohen, Mauro Elvedi and Jiahua Xu

    Citation:

    Braun, Alexander, Lauren H. Cohen, Mauro Elvedi, and Jiahua Xu. "ClearLife: From Prospect to Platform." Harvard Business School Teaching Note 220-036, October 2019.  View Details
    CiteView DetailsPurchase Related
  • Supplement | HBS Case Collection | October 2019

    ClearLife: From Prospect to Platform Spreadsheet Supplement

    Alexander Braun, Lauren Cohen, Mauro Elvedi and Jiahua Xu

    Citation:

    Braun, Alexander, Lauren Cohen, Mauro Elvedi, and Jiahua Xu. "ClearLife: From Prospect to Platform Spreadsheet Supplement." Harvard Business School Spreadsheet Supplement 220-706, October 2019.  View Details
    CiteView DetailsPurchase Related
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