Finding your calling: Matching skills with jobs in the mutual fund industry

Abstract

To best utilize labor, companies need to optimally match their employees’ skills with job types that best fit those skills. We examine this optimal matching process in the mutual fund industry. Mutual fund families enable their managers to try out funds with different investment styles in a learning-by-trying fashion until they find their optimal match. After this has happened, managers operate at higher productivity levels and tend to stay in the same investment style. Fund families respond to this rationally by allocating more capital to the optimally matched managers, while the optimally matched managers respond by taking more active bets.