BRAINY YOUNG FUND MANAGERSTheir mutual funds yield more
Shopping for a mutual fund? If your first instinct is to simply pick a ''hot fund'' with a strong showing in recent years, think twice. You might be better off choosing funds based on their manager's age and academic pedigree.
In a study of some 900 growth and growth-and-income funds from 1988 to 1994, Judith Chevalier of the University of Chicago and Glenn D. Ellison of Massachusetts Institute of Technology found that the returns posted by managers with degrees from universities whose entering students have high SAT scores--such as the Ivy League colleges--beat those of competitors from middling schools by more than a full percentage point. Younger managers and MBA-holders also outperformed their older and non-MBA rivals.
What's behind these differences? The researchers found that ''high SAT'' managers and those with MBAs tended to invest in high-risk, high-return stocks--a strategy that has paid off handsomely during the current bull market. And younger managers who do poorly tend to be booted out faster than established managers--a quirk that has the effect of boosting their average performance. It's also likely that top MBA students are sought out by top-tier fund families--where they benefit from generous research support and low expense ratios.
By GENE KORETZ
Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.