Making a Difference: European Mutual Funds Distinctiveness and Peers’ Performance

Skilled managers of equity mumtual funds can develop innovoative strategies to outsmart their style peers. We unveil various causes of distinct investment strategies and test whether they materialize into outperformance of peer competitors. We frame our paper on European funds and propose a novel procedure to measure and test the impact of strategy distinctiveness while dealing with endogenous style classification and sample noise in peers’ comparisons of performance. We find a strong, robust and positive impact of ostrategy distinctiveness on financial performance. Yet, the marginal effect decreases with the level of distinctiveness.