Commonalities in investment strategy and the determinants of performance in mutual fund mergers

► We examine the target-acquirer pairing process in mutual fund mergers. ► Synergy is measured by comparing commonalities in holdings characteristics. ► Mergers between funds with greater commonalities realize superior performance. ► These benefits transcend lower rebalancing costs, suggesting synergistic benefits between merging funds. ► Entrenched boards are related to greater mismatches between merging funds.