"Though only a fraction of this cost is experienced by the fund manager, the cumulative cost of having a foreign-sounding name over the entire career span of a fund manager can be significant," Kumar said. "These findings add to the economics literature on discrimination, which shows that despite growing public awareness, discrimination influences decision-making in many areas.”

The study showed that the loss of advisory fees increases with fund performance. Funds in the 80th percentile of performance missed out on $318,432 in advisory fees. Extreme outperformers experienced even greater loss of compensation, climbing to almost $700,000 in lost fees.

The study also found that these effects are stronger for funds that have more conservative investor clienteles or are located in regions where racial and ethnic stereotypes are more pronounced. Investors who live in regions with greater proportions of foreign-born individuals invest more in funds whose managers have foreign-sounding names. Current events also impact investors, as the study found a decline of trust in foreign names after the Sept. 11 attacks and the Boston Marathon bombings.

For a look at the full study, visit http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1951524.

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