The promotion of star funds can sometimes create a conflict of interest for mutual fund managers. The New York Times, reporting on the results of a new study entitled Spillover Effects of Marketing in Mutual Fund Families says that fund companies often promote one "star" performing fund, to the detriment of all other funds. The study's authors find this is effective because while a "star" fund may attract copious inflows, funds at the bottom of the heap tend not to suffer proportionately large outflows. So the upside is great and the downside is minimal. The only one left holding the bag are typically the lower performing funds' shareholders, but they can always move their money to the "star" fund anyway.  

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