House of Funds
I document that political connections are an important driver of investment strategies of U.S. mutual funds. I collect data on mutual fund holdings of U.S. Congress members and equity holdings of mutual funds from 2004 to 2013. I show that funds whose shares belong to politicians place larger bets and trade more actively in stocks of politically sensitive firms, and in stocks of firms that operate in industries under the scope of politicians’ congressional committees. Connected mutual funds perform significantly better on these equity holdings than their non-connected peers.