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Studying a comprehensive universe of European-domiciled cross-border UCITS equity and fixed income funds we find that (i) active equity funds on average outperform passive alternatives before fees by about the level of the fees, (ii) active fixed income funds underperform on a net basis, (iii) fees consume a significant part of the value added of active management, (iv) simple fund selection rules help to identify the better active managers. Finally, we develop the concept of minimum required selection skill and find that investors in actively managed funds could meet this hurdle provided fees are limited.

A simple framework decomposes changes in a fund family’s market share into four components. The components are highly relevant for understanding mutual fund market dynamics and evaluating the business performance of fund families. Two components are performance driven, and two are flow driven. Analysis of US market data shows that the “Excess Flows” component, which measures whether fund family flows exceed or lag those of competitors that operate in the same fund categories, has the biggest impact on fund-family market share changes. Major cross-sectional differences characterize how individual families score on each of the components. Fund families can use this framework to provide input for strategic decision making.

The investment fund governance frameworks of the U.S., the largest fund domicile globally, and Luxembourg, the second-largest domicile, differ significantly. U.S. funds have mandatory independent directors and these directors are empowered to be the watchdogs of the fund investors, negotiating fees with the fund management company on their behalf. This is not the case for Luxembourg funds, established in accordance with the E.U. UCITS Directive. This study uses a sample of Luxembourg UCITS funds and shows that, although there is no regulatory requirement, approximately half of the sample funds have appointed at least one independent board member. Among Anglo-Saxon fund promoters of these Luxembourg funds, the level of independence is higher than among continental European promoters and has increased in the past decade. In that same period, continental European promoters have decreased the level of independence of their funds boards. A survey among board members of the sample funds showed that, in absence of the requirement to negotiate fees with the fund management company, Luxembourg boards give relatively low priority to costs, which they see as an area that is primarily the prerogative of the promoter. That this is irrespective of whether the board has independent board members, is consistent with earlier quantitative research, that did not provide consistent evidence that funds with more independent boards have lower costs. "Keywords: "" Investment funds; European Union; Governance; Board of directors; Board independence;Fund costs."""

In order to protect fund investors against conflicts of interest with fund management companies, US funds have mandatory independent directors, but this obligation is not required under the European Union Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. Nevertheless, a considerable number of UCITS funds do have independent directors. Whether independent directors should also be mandatory in Europe has been a topic of ongoing debate. Using a sample of Luxembourg UCITS, we test the hypothesis that more independent boards add value for investors through lower costs and/or better investment performance, but we fail to find supporting evidence, even for funds with a higher risk of conflicts of interest. Oversight by independent depositaries and institutional shareholders does not seem to be effective either. It appears that board attitude and the sponsor distribution model are more important since we find evidence that boards that prioritise cost monitoring have lower costs and that independent sponsor funds have better performance. These results question the effectiveness of self-regulation or formal regulation requiring independent board members.

We investigate the effect of the fund family's brand on mutual fund flows by using a unique data set that represents a direct assessment of the brand image of European fund providers. A superior brand image increases the sensitivity of flows to good past performance, while it protects against outflows when there is underperformance. Flows of funds of independent providers have a higher sensitivity to past performance and brand image than flows of funds of providers owned by banks or insurers. These findings highlight the importance of marketing and brand in generating growth for the fund families.

We investigate the effect of the fund provider s brand on mutual fund flows by using a unique data set that represents a direct assessment of the brand image of European fund providers. A superior brand image increases the sensitivity of flows to past performance, while an inferior brand decreases it. Funds with a superior brand are not protected against outflows when there is underperformance. A superior brand, coupled with high past performance, generates persistent inflows and performance persistence so investors will benefit when a superior brand fund with high past performance is chosen.

To protect fund investors against conflicting interests with fund management companies, U.S. mutual funds have mandatory independent directors. That is not the case for funds in Europe, set-up in accordance with the UCITS Directive. Benefitting from the cross-border distribution possibilities of this E.U. legislation, Luxembourg has developed into the second largest fund domicile globally. Although it is not mandatory, many Luxembourg fund boards do have independent members on a voluntary basis. Using a sample of Luxembourg UCITS, this paper finds no consistent evidence that more independent boards have lower costs or achieve better investment performance. However, there are consistent and significant differences between fund management companies that are part of banks or insurers and independent fund management companies. Funds of the latter category have higher costs, but perform better after costs. "Keywords:""Investment funds; European Union; Governance; Board of directors; Fund costs; Fund performance."""