A study of analyst-run mutual funds: The abilities and roles of buy-side analysts

•Assess the abilities of buy-side analysts within mutual fund families•Funds run by buy-side analysts realize positive style- and risk-adjusted returns.•Analysts' skills positively affect the performance of affiliated funds.•Ideas of buy-side analysts are underutilized by affiliated managers.•Longer-tenured managers forgo some of the analysts' ideas due to career considerations.

We assess the abilities and the role of buy-side analysts within mutual fund families by analyzing mutual funds managed by buy-side analysts from fourteen fund families. Buy-side analysts exhibit investment abilities by realizing positive style- and risk-adjusted returns and generating superior risk-return tradeoffs. Analysts' skills have a positive impact on the performance of funds from the same family. Although some managers benefit from closely following their buy-side analysts' ideas, research generated by these analysts is generally being underutilized by affiliated managers. The underutilization is consistent with longer-tenured managers choosing to forgo some of the analysts' ideas due to career considerations.