Bank affiliation and mutual funds' trading strategy distinctiveness

This study investigates the effect of commercial bank affiliation on mutual fund trading strategy distinctiveness. We find that bank affiliation has a significantly positive relationship with mutual funds' unique investment strategies, and this phenomenon exhibits better performance, supporting the benefits of bank affiliation. This association is most pronounced around macroeconomic releases, during high economic policy uncertainty periods, and among funds located within a close distance from their parent bank headquarters. Further analysis indicates that the more talented affiliated fund managers tend to pursue the distinctive strategy. Therefore, our evidence reveals that the underlying mechanisms are that affiliated funds own information advantages or hire more skilled fund managers due to the unique position of commercial banks in the economy. Finally, our results suggest that affiliated funds with a higher Strategy Distinctiveness Index attract stronger net inflows and are less exposed to risks. Our findings remain unchanged after several robustness tests.