Network Nexus: Exploring the Impact of Alumni Connections of Managers on Mutual Fund Performance in India

Abstract

The paper investigates the influence of the alumni social network of mutual fund managers on fund performance in India. The alumni networks of 211 managers managing 585 funds are constructed through seven network centrality measures for the period from April 2013 to March 2022. The study finds that fund managers who are more central to the network on average generate higher risk-adjusted excess return performance (alpha) and take a higher level of idiosyncratic risk. Although the centrality position of managers does not influence them in selecting small-capitalisation, value, and high market-beta stocks, more central fund managers tend to pick momentum stocks. The results affirm that the information advantages in the central position of alumni social networks improve fund performance, influence the managers’ investment style and enable higher risk-taking behaviour. The contribution of the paper is that the findings regarding investment style and fund flows are different than those of developed markets which may be relevant for other emerging markets.