Your Money: Apr. 26, 1999

How Fund Mergers Hurt You

More firms like Invesco are trying to bolster faltering, small-cap mutual funds by combining them with winners (382 mergers last year alone), but it may be a losing proposition. To give long-suffering shareholders a boost, it seems, high-flying investors have to take a dive. According to a recent academic study, the performance of the acquiring stock funds, as measured by their objective-adjusted returns (how they fared relative to their peers), tends to drop after they've absorbed all that new cash.

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