Active Mutual Fund Common Owners’ Returns and Proxy Voting Behavior

Active equity mutual funds that own shares in product-market competitors have higher risk-adjusted returns, even after fees. This positive association comes from their common ownership positions, and remains robust after controlling for industry concentration, common stock selection, and the tendency to invest in firms with more common ownership. These funds charge higher fees and are active voters: more likely to vote against executive pay-for-performance and for directors with existing directorships in competitors. The authors' findings suggest that actively managed equity mutual funds are incentivized to soften product-market competition, and proxy voting may serve as a mechanism for influencing corporate policy.