The Factors that Investors Value when Choosing Mutual Funds: Implications from a Market Dominated by Four Banks

Abstract: This thesis investigates the relationship between fund flows and fund company/fund specific attributes and analyses what underlying factors investors value when making investment decisions on the Swedish market for mutual funds. By conducting a study comprising both an analysis of fund data and an investor survey, we have been able to analyse investor behaviour from two viewpoints. The results show that fund companies should focus on improving the performance of mixed and fixed income funds as this increases future flows of capital to the fund. Despite the fact that the Swedish market is dominated by four banks, they do not receive proportionally larger fund flows than other fund companies. Inexperienced investors place a greater deal of importance on company specific variables in relation to fund specific variables. For experienced investors, the relationship is the opposite. Search and information costs, measured as visibility and company specific variables, are found to be important in the data analysis, but not significantly favoured by either group in the survey.