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Article
Publication date: 30 December 2020

Caddie Putnam Rankin

This empirical study seeks to understand how mutual fund firms interpret conflicting pressures to conform or differentiate in the context of corporate social…

Abstract

Purpose

This empirical study seeks to understand how mutual fund firms interpret conflicting pressures to conform or differentiate in the context of corporate social responsibility (CSR). Research suggests that organizations engage in practices that conform to industry standards in order to be seen as legitimate members of their industry. Other studies suggest that organizations differentiate themselves in order to compete and outperform their rivals. Pressures for organizational conformity and differentiation are explored in two types of organizations in the mutual fund industry: socially responsible investment (SRI) and non-SRI firms.

Design/methodology/approach

The research is based on qualitative in-depth interviews with twenty-six mutual funds.

Findings

The analysis revealed that pressures for conformity and differentiation were salient among mutual fund executives but emphasized differently for the two types of mutual funds.

Originality/value

The study concluded by suggesting SRI firms use both strategies of conformity and differentiation to amplify the message that they adhere to the values of CSR.

Details

Qualitative Research in Organizations and Management: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-5648

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Article
Publication date: 1 January 2002

Rogér Otten and Mark Schweitzer

Outlines previous research on the mutual fund industry and compares the characteristics of the US and European mutual fund markets using the structure‐conduct‐performance…

Abstract

Outlines previous research on the mutual fund industry and compares the characteristics of the US and European mutual fund markets using the structure‐conduct‐performance paradigm. Shows that the European industry is smaller, with more funds and more emphasis on fixed income, with the UK and US having lower concentration ratios than mainland Europe; and the US a wider range of fees. Contrasts the use of different distribution channels and performance statistics; and uses 1991‐1997 data to compare actual stock market returns against benchmarks and between countries. Analyses this in detail and notes with surprise the European funds have a better average performance than US funds.

Details

Managerial Finance, vol. 28 no. 1
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 2 March 2011

Gyorgy Varga and Maxim Wengert

This chapter describes the evolution of the Brazilian investment fund industry and the impact of domestic and international crises on investors, managers and the main…

Abstract

This chapter describes the evolution of the Brazilian investment fund industry and the impact of domestic and international crises on investors, managers and the main types of funds offered in Brazil. In particular, it explores the effect of the subprime crisis and shows that the first wave of this crisis had very little impact, but the second wave with the collapse of Lehman Brothers did have a major impact on risk, returns and flows of the mutual fund industry in Brazil.

Details

The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

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Article
Publication date: 21 September 2012

Pornlapas Na Lamphun and Winai Wongsurawat

The purpose of this research is to supply basic statistics of fees and expenses charged by mutual funds in Thailand, and to investigate the economic determinants of the…

Abstract

Purpose

The purpose of this research is to supply basic statistics of fees and expenses charged by mutual funds in Thailand, and to investigate the economic determinants of the variations in these charges.

Design/methodology/approach

The authors construct an original dataset on characteristics of Thai mutual funds from annual reports filed between 2005 and 2007, and then use statistical analysis to investigate variations in fees and expenses.

Findings

Funds that are small, entail higher risk, and offer special income tax benefits charge higher fees and expenses. Bond funds that produce high returns on investment tend to charge significantly lower fees and expenses when compared to those that produce low returns.

Practical implications

Statistics from the gathered data can help investors better evaluate Thai mutual funds. Determinants of variations in the fees and expenses can yield useful insights for policy makers regarding the competition and efficiency of the asset management industry.

Originality/value

This paper adds to a small but growing literature that investigates characteristics of the asset management industries outside of the United States and Europe.

Details

International Journal of Emerging Markets, vol. 7 no. 4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 1 January 2005

W. Hardy Callcott

On September 3, 2003, New York Attorney General Eliot Spitzer announced what quickly became the gravest scandal in the mutual fund industry in the 65 years since Congress…

Abstract

On September 3, 2003, New York Attorney General Eliot Spitzer announced what quickly became the gravest scandal in the mutual fund industry in the 65 years since Congress passed the Investment Company Act of 1940. Spitzer’s office discovered that some hedge funds had been permitted to trade shares of open‐end mutual funds after that day’s net asset value (NAV) for those mutual funds had been set (typically at 4:00 PM eastern time). This practice allowed the hedge funds to profit based on corporate news announcements released after that time, and therefore not reflected in the mutual funds’ daily NAV. Moreover, Spitzer disclosed that some mutual fund advisers had only selectively enforced the stated limits in their prospectuses on frequent trading, or market timing, of those mutual funds. In some cases, mutual fund advisers had permitted selected investors to conduct frequent trading in mutual funds in return for investments (sometimes referred to as “sticky assets”) in other investment vehicles, or had permitted frequent trading by officers of the adviser itself. And some mutual fund advisers had selectively disclosed information about portfolio holdings of the funds to hedge funds that used that information to arbitrage the mutual funds’ positions. This was the second major securities industry scandal uncovered by Spitzer’s office in just two years. In 2002, Spitzer’s office uncovered the research analyst independence scandal that culminated in a global settlement with the country’s major investment banks. Spitzer’s 15‐person Securities Bureau appeared more nimble and better informed than the thousands of staff members at the Securities and Exchange Commission, the federal agency charged with regulating the mutual fund industry. The SEC ‐ already under fire for the unprecedented wave of corporate and brokerage industry scandals that led to adoption of the Sarbanes‐Oxley Act ‐ had to endure yet another round of vocal public criticism.

Details

Journal of Investment Compliance, vol. 5 no. 4
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 1 February 2021

Fernando Muñoz, María Vargas and Ruth Vicente

This study aims to examine style-deviation practices in the socially responsible mutual funds (SMRF) industry i.e. how mutual funds game their stated financial objectives…

Abstract

Purpose

This study aims to examine style-deviation practices in the socially responsible mutual funds (SMRF) industry i.e. how mutual funds game their stated financial objectives to earn a higher relative performance ranking. In addition, the consequences of such practices on sustainable scores and money flows are studied.

Design/methodology/approach

A sample of 454 US equity SRMFs is studied. This paper uses panel regressions controlling for time and style fixed-effects.

Findings

This study finds that 17.60% of SRMF managers in the sample are engaged in style deviation practices. These practices positively impact the sustainable performance of SRMFs and negatively impact their financial performance. One effect offsets the other and they consequently do not affect money flows. Another finding is that only investors with lower portfolio sustainability scores do show return-chaser behaviour.

Practical implications

This paper reveals that SRMF managers deviating from their stated financial style face a dilemma that is non-existent for their conventional peers that is style deviation practices affect financial and sustainable performance in opposing ways, whereas SRMF investor utility depends positively on both dimensions. The findings are not conclusive about the effectiveness of style deviation practices in attracting SRMF money flows.

Social implications

SRMF industry has experienced tremendous growth in the past decade. The increased competition in this industry has led managers to strive to attract investors, sometimes by relying on irregular practices that enhance their portfolio results. Regulators should consider how to avoid such perverse behaviour with a view to improving mutual funds transparency.

Originality/value

This is the first research that analyses style deviation practices and their consequences for the SRMF industry.

Details

Sustainability Accounting, Management and Policy Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 1 April 2006

M.C. Meyer‐Pretorius and H.P. Wolmarans

The vast global unit trust/mutual fund industry was worth more than $16 trillion by the end of June 2005. Over time, investors’ interests seem to have shifted from…

Abstract

The vast global unit trust/mutual fund industry was worth more than $16 trillion by the end of June 2005. Over time, investors’ interests seem to have shifted from individual shares to share funds. The unit trust industry in South Africa is no exception. Over the 40‐year period from its inception in 1965 to 2005, the industry has grown from only one fund to 567 different funds, worth more than R345 billion. This study highlights some of the most important changes that have occurred in the South African unit trust industry over the last 40 years. These shifts are compared to changes that the USA mutual fund industry has experienced in the 60 years of its existence. An attempt is then made to answer the question whether South African investors are better off with these changes or not.

Details

Meditari Accountancy Research, vol. 14 no. 1
Type: Research Article
ISSN: 1022-2529

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Article
Publication date: 1 January 2005

Jonathan L. Kotlier

To emphasize the need for financial services companies such mutual funds and brokerage houses to establish internal controls and related procedures for identifying…

Abstract

Purpose

To emphasize the need for financial services companies such mutual funds and brokerage houses to establish internal controls and related procedures for identifying potential conflicts of interest.

Design/methodology/approach

Reviews government investigations into scandals involving the mutual fund industry over the past two years, including late trading, marketing timing, revenue sharing, directed brokerage, and gift‐giving; notes that criminal prosecution in this area is infrequent but still possible; and recommends, given the current landscape, that financial services companies examine their procedures for identifying and eliminating conflicts of interest.

Findings

Concludes that recent mutual fund scandals have changed the regulatory landscape and the regulators, and in some cases prosecutors, are committed to aggressively pursuing any possible impropriety or conflict of interest between mutual fund advisors and the investing public.

Originality/value

Provides a useful review of recent mutual fund scandals for the purpose of demonstrating to fund managers and directors why they should review their controls and related procedures to identify and eliminate conflicts of interest.

Details

Journal of Investment Compliance, vol. 6 no. 1
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 1 June 2003

Bala Ramasamy and Matthew C.H. Yeung

Growth, both in terms of size and choice, in the mutual fund industry among emerging markets has been impressive. However, mutual fund research in emerging markets hardly…

Abstract

Growth, both in terms of size and choice, in the mutual fund industry among emerging markets has been impressive. However, mutual fund research in emerging markets hardly exists. This paper intends to fill this gap. In particular, the paper surveys the relative importance of factors considered important in the selection of mutual funds by financial advisors in emerging markets. Our survey focuses on Malaysia where the mutual industry started in the 1950s but only gained importance in the 1980s with the establishment of a government initiated programme. The results of our survey point to three important factors which dominate the choice of mutual funds. These are consistent past performance, size of funds and costs of transaction. Factors which relate to fund managers and investment style are not considered to be relatively important. With the impending liberalization of the financial markets in the developing world, our findings would assist those international funds that are considering expanding their operations into these emerging markets.

Details

International Journal of Bank Marketing, vol. 21 no. 3
Type: Research Article
ISSN: 0265-2323

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Article
Publication date: 11 May 2018

Venessa S. Tchamyou, Simplice A. Asongu and Jacinta C. Nwachukwu

The purpose of this paper is to investigate the effects of information asymmetry (between the realized return and the expected return) on market timing in the mutual fund industry.

Abstract

Purpose

The purpose of this paper is to investigate the effects of information asymmetry (between the realized return and the expected return) on market timing in the mutual fund industry.

Design/methodology/approach

For the purpose, the authors use a panel of 1,488 active open-end mutual funds for the period 2004-2013. The authors use fund-specific time-dynamic betas. The information asymmetry is measured as the standard deviation of idiosyncratic risk. The data set is decomposed into five market fundamentals in order to emphasis the policy implications of the findings with respect to: equity, fixed income, allocation, alternative, and tax-preferred mutual funds. The empirical evidence is based on endogeneity-robust difference and system generalized method of moments.

Findings

The following findings are established. First, the information asymmetry broadly follows the same trend as volatility, with a higher sensitivity to market risk exposure. Second, fund managers tend to raise (cutback) their risk exposure in time of high (low) market liquidity. Third, there is evidence of convergence in equity funds. The authors may, therefore, infer that equity funds with lower market risk exposure are catching-up with their counterparts with higher exposure to fluctuation in market conditions.

Originality/value

The paper complements the sparse literature on market timing in the mutual fund industry with time-dynamic betas, information asymmetry and an endogeneity-robust empirical approach.

Details

International Journal of Managerial Finance, vol. 14 no. 5
Type: Research Article
ISSN: 1743-9132

Keywords

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