Search results

The uncertainty as to whether investments in riskier and less efficient markets allow managers to ‘beat the market’ remains a question to which answers are required. Accordingly, the purpose of this chapter is to offer new insights on portfolios of the US, European and Emerging Market (‘EM’) domiciled equity mutual funds whose objectives are the investment in emerging economies, and specifically analyses two main issues: alpha generation and the influence of the funds’ characteristics on their risk-adjusted performance.

The dataset is made up a survivorship-bias controlled sample of 137 equity funds over the period January 2004 to December 2014, which are then grouped into equally weighted portfolios according to the scheme’s origin. The Jensen’s (1968) Single-Factor model along with the Fama and French’s (1993) and Carhart’s (1997) multifactor models are employed to authenticate results and answer both research questions.

Research analysis reveals that EM exposed fund managers fail to collectively outperform the market. It thereby offers ground to believe that the emerging world is very close to being efficient, proving that the Efficient Market Hypothesis (‘EMH’) ideal exists in this scenario where market inefficiency might only be a perception of market participants as any apparent opportunity to achieve above-average returns is speedily snapped up by very active managers. Overall these managers take a conservative approach to portfolio construction, whereby they are more unperturbed investing in large cap equity funds so as to lessen somewhat the exposure towards risks associated with liquidity, stability and volatility.

Furthermore, the findings show that large-sized equity portfolios have the lead over the medium and small-sized competitors, whilst the high cost and mature collective investment vehicles enjoy an alpha which although is negative is superior to their peers. The riskiest funds generated the lowest alpha, and thereby produced doubts as to whether investors should accept a higher risk for the hope of earning higher returns, at least when aiming to gain an exposure into the emerging world.

Mutual fund performance is not an innovative topic so to speak. Nonetheless, researchers and academia have centred their efforts on appraising the behaviour of fund managers domiciled primarily in developed and more efficient economics, leaving the emerging region highly uncovered in this respect. This study, therefore aims at crafting meaningful contributions to the literature as well as to the practical perspective.

Mutual funds in India have not been as favourable investment alternatives as in developed countries, as assets under management of mutual funds to gross domestic product in India have been 7-8 per cent compared to 37 per cent globally. Further, investor base of mutual funds has been narrow, as retail investors constitute 98 per cent of folios but contributed only 58 per cent of investments in September 2014. To broaden the investor base for mutual funds in India, it remains imperative to understand the determinants of investment behaviour of investors towards mutual funds. This study aims to achieve this objective.

Based on the theory of planned behaviour, the study examined the effect of awareness, attitude (perception for outcome) and socioeconomic conditions of an investor on his investment behaviour towards mutual funds with the logit model. The results are based on 450 valid responses from the primary survey in Delhi-NCR.

The research provided that investment behaviour could be explained with awareness, perception and socioeconomic characteristics of individual investors. Better awareness related to various aspects of mutual funds will have a positive effect on investment in mutual funds. Contrary to belief, risk perception for mutual funds had no effect on the investment decision. Further, socioeconomic characteristics such as age, gender, occupation, income and education of investors had an impact on the awareness about mutual funds.

As the study has been confined to Delhi-NCR, it should be considered a pilot study and needs to be replicated in other states of India to have more robust results.

The study has implications for mutual funds and regulators. The study highlights a lack of awareness about mutual funds among particular sections of society as a reason for non-investment in mutual funds. The mutual funds and regulators need to focus on females, older age groups and middle-income groups in their efforts to improve their awareness about mutual funds. This would improve their investor base and flow of funds in mutual funds. Furthermore, the process of investment in mutual funds needs to simplified.

In an Indian context, this study has been the first attempt to understand the systematic relation between actual investment behaviour towards mutual funds and various determinants such as socioeconomic characteristics, awareness and attitude (perception) about mutual funds.

The fund selection process of investors in a mutual fund needs to be understood for designing better marketing strategies. Knowledge and perception about the mutual funds can affect investor’s behaviour towards information search and selection criteria during the decision process. Therefore, this study aims to examine Indian mutual fund investors under the framework of Theory of Planned Behaviour and consumer’s behaviour model.

The data have been collected from mutual fund investors in the National Capital Region–Delhi, India, through structured questionnaire. The collected data were examined with relevant statistical tools.

Knowledge and perception affect information search behaviour of the investor. Investors having better knowledge of mutual funds access impersonal sources of information and performance of fund affects their choice, whereas investors having lesser knowledge of mutual fund take advice of experts and select funds based on fund characteristics. Investors with better return perception for mutual funds ignore performance as selection criteria, whereas investors having poor risk perception tend to reduce their bias by accessing personal sources of information. Education and income of investor affect knowledge and perception of mutual funds.

The financial advisor-driven investors ignore performance as selection criteria and could lead to dissatisfaction later. Therefore, to make the industry investor driven, mutual funds need to focus on improving the knowledge of investors.

This paper shows the unique effect of knowledge and perception on information search behaviour of investors towards mutual funds. The knowledgeable investor selects mutual funds by understanding all risks and benefits.

The purpose of this paper is to examine the ability of well known fund characteristics such as the recent past performance, fund size, management fees, fund age, net asset value and fund growth so as to explain Tunisian equity mutual fund performance.

The sample was split according to investment objectives, and the advanced dynamic panel data approach was used over the period 1999‐2006.

The authors find that past performance and fund size have a positive and significant influence on future performance for all fund categories, irrespective of what performance measure was used. This may indicate the existence of scale economies in the Tunisian equity mutual fund industry. The author also find that the other fund characteristics play an important role in explaining performance, but their impact varies among the fund categories. In all, regression results support the dynamic links between fund characteristics and future performance.

The findings do not take into account the behaviour of fund managers and their ability to extend the investment opportunities set. It seems that there are more complex factors related to the strategic behaviour of the manager and driving differences in performance across funds than previous studies have indicated.

The authors confirm the empirical evidence that historical performance contains some information about future performance and such information may be important to mutual fund investors. It was also found that fund size is positively related to future performance of small fund category as well as of large fund category. This may indicate the existence of scale economies in the Tunisian equity mutual fund industry. In addition, the influence of the other control variables varies among the fund categories, but often is the same as in earlier studies.

The paper provides information to foreign investors for investing in Tunisian capital market.

In this regard, the study of literature revealed that the explanation of performance, based on quantitative factors, is often limited to a static approach that involves making estimates resting on multiple regression, regression in cross section and principal component analysis for short periods. However, several empirical studies highlight the impact of past performance on future performance. It seemed essential to enrich the analysis by using a dynamic approach.

The Canadian mutual fund setting is unique in that two governance mechanisms – corporate and trust – coexist. This study empirically examines the impact of each mechanism on fund fees and performance. We find that corporate class funds charge higher fees but deliver superior fee-adjusted returns than trust funds. We then analyze the impact of various board characteristics on fees and performance for corporate class funds. We find that a board with smaller size, CEO duality, and a higher percentage of independent directors is more likely to charge lower fees. In addition, smaller boards are strongly associated with higher fee-adjusted performance. Our study supports agency theory over stewardship theory and provides valuable guidelines for Canadian investors and regulatory agencies.

This study aims to analyze the impact of corporate governance characteristics on the risk exposure of Islamic mutual funds prevailing in different Islamic countries (Pakistan and Malaysia).

This study used dynamic panel regression model for analysis and estimated the results using system generalized method of moment technique. A sample of 185 Islamic funds is used in the current research, which is selected using judgmental sampling. The data span of this study consists nine years from 2009 to 2017.

The results showed that the corporate governance characteristics such as board independence, directors and institutional ownership and overall governance quality are helpful in reducing the total and downside risk exposure of Islamic mutual funds. The findings also suggest that board size and Chief Extractive officer duality play no role in mitigating the risk of Islamic funds prevailing in both countries.

This study has implication for industry practitioners and fund managers. This study showed that the corporate governance characteristics are helpful in reducing the risk exposure of Islamic mutual funds. Therefore, this study provides input to the investment firms to improve the quality of corporate governance for lowering the risk exposure of mutual funds.

To the best of the authors’ knowledge, this study is the first attempt to analyze the impact of corporate governance characteristics on the risk exposure of Islamic mutual funds and hence provides significant contribution in the literature of mutual funds.

This paper aims to explore whether individual intellectual capital of a fund manager allows mutual fund to outperform market.

The sample includes 85 Russian equity funds for the period of 2013. First, Jensen’s alpha for each fund has been calculated, and then cross-sectional regression analysis has been used. While only a part of fund managers publish biographic sketches, the authors use the Heckman procedure to control for self-selection issues.

The results support the idea that the individual characteristics indicate the possibility to earn abnormal alpha. Managers with economic education and with Moscow education perform better than others. Relationship between both fund performance measures and manager’s experience has inverted U-shape. Jensen’s alpha reaches its highest level at the point of 9 years, whereas beta – at 10 years of manager’s experience.

Investigation can be improved by including more variables that influence the disclosure of managers’ personal information, for example, by conducting surveys. Additionally, cross-sectional data restrict the analysis.

The discovered characteristics of managers’ intellectual capital can be used as additional screening tool for the investor who is deciding on mutual fund choice in Russia. While individual intellectual capital is observable and more persistent in time in comparison with the past fund performance, such tool allows better decision-making.

This is the first paper that explores which characteristics of Russian fund managers are connected with higher abnormal return (measured by Jensen’s alpha) and risk (beta) of mutual funds.

The present study tries to explore the various fund attributes that influence the mutual fund performance. Further, study examined the effect of mutual fund attributes namely, Net Asset Value (NAV), Portfolio turnover ratio (PTR), fund size (AUM), expense ratio (ExpR) and fund age (Age) on mutual fund's performance using gross return and risk-adjusted performance measures.

The study evaluated balanced panel data (short panel) comprising 81 Indian equity mutual fund schemes for the period of 2013–2019. The study estimated relationship between fund attributes (Net asset value, Portfolio turnover ratio, Fund age, fund size and Expense ratio) and fund performance (using gross return and risk-adjusted performance measures), through panel data regression using fixed-effects model as suggested by Hausman specification test on transformed data (due to high multicollinearity), with cluster-robust estimators due to the presence of heteroskedasticity in the model.

The findings of the study suggested that using gross return as fund performance measure, PTR, NAV, AUM, Age exhibit significant relationship with the fund performance whereas using risk-adjusted performance measures (Treynor ratio and Jensen alpha) NAV and ExpR significantly influences the fund performance. Identification of the significant relationship between fund characteristics and fund performance offers valuable insights to the investors and fund managers for rationally managing their portfolio with the ultimate objective of the wealth maximization.

The study considered only 81 equity mutual fund schemes. Some of the data were not available at the time of the study due to the policy of the company. The present study contributes significantly in examining the expected association between fund attributes and fund performance in the context of Indian mutual fund industry where this relationship were explored less.

The findings of the present study will help the investors to take the rational investment decision with the ultimate objective of maximum return with minimal risk. The findings also offer significant germane to the stakeholders in making rational decision-making process.

There is dearth of study concerning the relationship between mutual fund characteristics and fund performance with respect to Indian mutual fund industry. Therefore, study provides valuable insights to the area of the portfolio selection and management with respect to Indian mutual funds.

The purpose of this paper is to analyze the effects of individual manager characteristics on real estate mutual fund (REMF) performance. Human capital theory predicts that factors like education, experience and professional certifications improve skill sets and thus performance. Conversely, capital markets theory suggests that these things may be irrelevant in the management of mutual funds.

A total of 63 REMFs were sampled over the period 2001‐2003 and equations were estimate regressing, alternatively, risk‐adjusted return, market risk and management fees on a series of fund variables and manager characteristics including the manager's tenure, whether the fund manager holds a professional certification, whether the manager has specific real estate experience, and whether the fund is team‐managed.

Modest evidence is found that team‐managed funds have lower risk‐adjusted returns than solo‐managed funds. Managers with longer tenure tend to pursue higher market risk levels, and there is no relation between manager characteristics and management fees.

This study considers only one cross‐sectional time period. Future research might use longitudinal data.

Despite real estate being a specialized field of finance, there is little if any support for the predictions of human capital theory that experience, education and training result in greater performance among managers of REMFs.

This paper extends prior work in mutual fund management characteristics and fund performance to real estate funds.

The purpose of this paper is to investigate the impact of investor confidence on mutual fund performance in two relatively vulnerable but leading emerging markets, India and Pakistan.

A pooled ordinary least squared (OLS) model is used to look at two alternative measures of investor confidence and test for the relationship between investor confidence and mutual fund returns. To check the robustness of the findings, the authors also implement two-stage least squares and generalized method of moments techniques to control for unobserved heterogeneity, simultaneity and dynamic endogeneity problems in the regressors.

The paper finds that the returns of mutual funds are positively associated with investor confidence and an interaction effect exists between investor confidence and persistence in performance. The paper also confirms that returns from mutual funds are associated with different fund characteristics such as fund size, turnover, expense, liquidity, performance persistence and the fund’s age. These findings remain robust to alternative model specifications and measures of investor confidence.

While the previous literature mainly focuses on mutual fund characteristics and the macroeconomic determinants of mutual fund returns, this paper demonstrates that investor confidence plays an important role in determining mutual fund performance. The authors attribute this finding to two relatively unique features of the emerging markets in the study. A lack of awareness of mutual funds as being a low-cost investment vehicle and the interplay of cultural and behavioral changes have prevented investor’s savings from being channeled into investment products, away from gold or property.