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1 – 10 of over 16000This empirical study seeks to understand how mutual fund firms interpret conflicting pressures to conform or differentiate in the context of corporate social responsibility (CSR)…
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.
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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 structureâconductâperformance…
Abstract
Outlines previous research on the mutual fund industry and compares the characteristics of the US and European mutual fund markets using the structureâconductâperformance 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 1991â1997 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.
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Priya Malhotra and Pankaj Sinha
Mutual funds are the second most preferred investment option in India and have garnered considerable research interest. The focus of Indian studies thus far has been restricted to…
Abstract
Purpose
Mutual funds are the second most preferred investment option in India and have garnered considerable research interest. The focus of Indian studies thus far has been restricted to the bottom-up approach of investing which rewards a fund manager for picking winner stocks and generates superior returns. While changing portfolio allocation as per varying macro-trends has been instrumental in generating superior returns, it has not been given the desired attention. This study addresses this important research gap.
Design/methodology/approach
The authors analyze the industry selection ability of the fund manager on a robust sample by decomposing alpha into alpha due to industry selection and alpha attributable to stock selection. Alpha estimates are computed on a robust sample of 34 open-ended Indian equity mutual funds for a 10-year duration 2011â2020 using three base models of asset pricing â single-factor, four-factor and five-factor alpha under panel data methodology.
Findings
The study leads us to four major findings. One, industry selection explains more than two-fifth of the alpha both in cross-section and time series of returns; two, industry selection exhibits persistence for more than four quarters across asset pricing model; third, younger funds have level playing when alpha from picking right industries is concerned; four, broad industry allocation continues to explain superior returns as sector allocation undergoes consolidation during ongoing COVID-19 pandemic and funds increase exposure to defensive stocks, consistent with folio allocations as per macroeconomic conditions.
Research limitations/implications
The authors find strong evidence of persistence in the case of alpha attributable to the industry selection component, and the findings are consistent with the persistence results reported in the empirical literature. While some funds excel in stock-picking skills and others excel in picking the right industries, both skills together make for winner funds that attract larger investor flows as investors chase superior performance. The authors also find no evidence of diseconomies of scale in the case of industry allocation alpha generated by the fund managers.
Practical implications
The results suggest a fresh approach for investors while making mutual fund investment decisions; the investors can achieve superior returns by assessing industry selection skills as it tends to provide a more holistic picture concerning a perennial question â why some funds outperform and continue to contribute to investor's wealth?
Social implications
Mutual funds have become a favored investment option for Indian investors more so as a disciplined investment option owing to dismal financial literacy rates. The study throws light on a relatively unaddressed dimension of choosing winner funds. The significance of right sector allocation assumed even more significance with the onset of the pandemic which lends further credence to the findings of the study.
Originality/value
Research has been conducted on secondary data extracted from a well-cited database for Indian mutual funds. Empirical analysis and conclusion drawn are based on authentic statistical analysis and adds to the existing literature.
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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 variations…
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.
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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, investorsâ interests seem to have shifted from individual…
Abstract
The vast global unit trust/mutual fund industry was worth more than $16 trillion by the end of June 2005. Over time, investorsâ interests seem to have shifted from individual shares to share funds. The unit trust industry in South Africa is no exception. Over the 40âyear 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.
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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…
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. Spitzerâs office discovered that some hedge funds had been permitted to trade shares of openâend mutual funds after that dayâs 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 fundsâ 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 âsticky assetsâ) 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 fundsâ positions. This was the second major securities industry scandal uncovered by Spitzerâs office in just two years. In 2002, Spitzerâs office uncovered the research analyst independence scandal that culminated in a global settlement with the countryâs major investment banks. Spitzerâs 15âperson 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 â already under fire for the unprecedented wave of corporate and brokerage industry scandals that led to adoption of the SarbanesâOxley Act â had to endure yet another round of vocal public criticism.
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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 to earn…
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.
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To emphasize the need for financial services companies such mutual funds and brokerage houses to establish internal controls and related procedures for identifying potential…
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 giftâgiving; 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.
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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 exists…
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.
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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.
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