Investors Beware: Mutual Fund Managers May Use This Trick to Hide Poor Performance

When it comes to mutual funds and their benchmarks, looks can be deceiving. A new research paper reveals how mutual fund managers may change their benchmarks to manipulate performance metrics. Here’s how mutual funds hide poor performances and what it means for investors.

In a research paper, “Moving the Goalposts? Mutual Fund Benchmark Changes and Performance Manipulation,” researchers Kevin Mullally and Andrea Rossi reveal how mutual fund managers may manipulate performance by changing the benchmarks against which they measure their returns.

Mullally and Rossi research mutual funds’ self-directed benchmarks. Their findings allow them to get an idea of just how much mutual funds manipulate the value they offer to investors.