Existing work on mutual fund performance persistence obtains diverse results, depending on the group of funds studied. We examine whether performance persistence within a peer group of competing mutual funds depends on the group's composition. The U.K. mutual fund industry is ideal for such an examination because funds compete within strictly defined sectors. We consider several attributes related to the intensity of competition within a sector and use them to explain sector-level persistence. We find robust evidence that persistence is higher in sectors where concentration of assets under management is higher. 2006 The Southern Finance Association and the Southwestern Finance Association.