| Equity asset managers within professional investment advisory firms will often manage both discretionary fee-based accounts as well as open-ended mutual funds---using comparable domestic equity investment disciplines. When retail and institutional investors choose between these products, their decision often hinges on performance and portfolio customization. After reconciling each product's gross performance for calculation methodology, management and trading costs, and systematic risk measures, we find that large and small-cap separately managed accounts outperform small and large-cap actively-managed open-ended mutual funds between 1998 and 2003. Consistent with prior research that compares different categories and classes of mutual funds, performance differences favor institutionally-managed account structures. However, when testing raw and risk-adjusted performance differences among concurrently managed products---where the same personnel manage a separately managed account and an open-ended mutual fund over the same time period, using identical investment disciplines---we find that only small-cap separately managed accounts outperform small-cap actively-managed open-ended mutual funds. We argue that this difference in performance is attributable to differences in asset growth as well as an advisory firm's reluctance to accept smaller separately managed accounts. |
