Mutual Fund Proliferation and Entry Deterrence

Abstract Why do so few mutual fund families launch so many funds and styles around the world? We argue that launching numerous funds on an increasingly granular style grid allows incumbent families to congest the product space and deter market entry. Key to this argument is the persistently low dimensionality of the mutual fund product space, a fact we establish by analyzing the names of over 40,000 equity funds sold in 91 countries between 1931 and 2015. Over time, the strategy of filling up the style grid has led to the dominance of few families offering large, granular, and similar fund menus. (JEL G15, G23, L1) Received November 23, 2021; editorial decision February 9, 2023 by Editor Marcin Kacperczyk. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.