Comparing performance sensitivity of retail and institutional mutual funds’ investment flows

•We study the flow-performance function for retail and institutional mutual funds.•The function appears to be convex in the upper region of the return scale.•In the region of the lower performance scale, the function appears to be concave.•The observed convexity of the function is more pronounced for retail funds.•The concavity of the function can be mainly attributed to institutional funds. In this paper, we examine and compare the form of the flow-performance relationship for U.S. retail and institutional mutual funds. We provide evidence that the convex form of the flow-performance function documented by previous research characterizes mostly the relationship in the upper region of the performance scale. In contrast, the flow-performance relationship for the low-performance region appears to be concave. Furthermore, we document that the observed convexity is more pronounced for retail funds, while the concavity can be mainly attributed to institutional funds.