Research

This paper studies the direct impact of new technologies on the asset management industry.
I show that technological innovations substantially improve fund managers’ ability to target customer demand and attract capital inflows, with implications for the industry’s structure. Exploiting information from their websites’ codes, I track when fund managers start collecting and analyzing customers’ data using tools like Google Analytics. Funds adopting such technologies attract 1.5% higher annual flows, with the effect being concentrated in retail share classes. Additionally, they expand product offerings and charge higher fees. The effects decrease with competition as more funds within the same category adopt similar technologies. Overall, these results show that technological innovation in asset management extends beyond portfolio allocation decisions to impact how funds attract and retain capital. This evidence highlights the economic importance of managers learning from investors’ data.

We investigate intermediaries demand for long-term cash flows by estimating a characteristic-based demand system on the equity holdings of primary dealers, pension funds, banks, and insurance companies. Institutions’ demand for equity duration varies over time and in the cross-section as a function of measures of capital availability. In the time-series, when financial constraints are tight, institutions curtail their demand for long-term claims and become more exposed to reinvestment risk. In the cross section, unconstrained institutions tilt their portfolio more strongly toward long-duration stocks compared to their constrained peers. We conclude that institutional constraints impair the ability to seek for the hedging properties of long-duration claims, to the point that institutions may be forced to leave their “preferred-habitat” allocation. Counterfactual analysis shows that shifts in preference for duration generate sizeable effects in the cross-section of stocks, with a stronger impact on firms with long-term cash flows.