Fundamental types of knowledge varies according to the type of mutual funds managed

What is it about?

Mutual fund portfolio managers rely on both tacit and encapsulated knowledge in managing their funds. The greater the analytical intensity required to manage a type of mutual fund the greater the probability that the portfolio manager will rely more on tacit knowledge than encapsulated knowledge. The greater the complexity of security valuation of in a mutual fund, the more likely the fund is going to be sub-advised by external portfolio managers.

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Why is it important?

Whether a mutual fund is sub-advised or not depends on the extent to which portfolio management is dependent on the use of tacit knowledge or encapsulated knowledge. Vertical integration appears to be a function of the ease with which production knowledge can be encapsulated.

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