Idea sharing and the performance of mutual funds

I develop an equilibrium model to explain why few mutual fund managers consistently outperform, even though many have strong informational advantages. The key ingredient is that managers obtain investment ideas through idea sharing. Idea sharing improves statis- tical significance of alpha through increased price informativeness. But it also causes better informed managers to take larger positions, which makes their alpha noisier—although a significant fraction of managers builds strong informational advantages, statistical signif- icance and persistence of alpha concentrate in underperforming funds. I argue that in- house development of ideas cannot explain these facts