New research shows that mutual fund managers tend to invest more in companies run by people with whom they went to college. These investments do much better than others. And that raises the possibility that executives may be sharing inside information with former classmates.
“It suggests that there is illegal activity going on, but it doesn’t provide the S.E.C. a road map” said one university finance professor in a New York Times piece about the research. “You certainly can’t prosecute someone for having a good return on a company by somebody they went to college with.”
Even so, the SEC has asked the study’s authors to present their findings to its analysis group. Similar “investigative economics” research put the spotlight on back-dated corporate stock options and illegal after-hours trading by mutual funds.
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New York Times | Quantifying the Role of Old-School Ties in Investing
