Mutual fund volatility timing and management fees

2009 ◽  
Vol 33 (4) ◽  
pp. 589-599 ◽  
Author(s):  
Erasmo Giambona ◽  
Joseph Golec
Keyword(s):  
Mutual Fund ◽  
Management Fees ◽  
Volatility Timing

Management fee base: financing and investment decisions

2015 ◽  
Vol 8 (1) ◽  
pp. 46-65
Author(s):  
Pierpaolo Pattitoni ◽  
Barbara Petracci ◽  
Valerio Potì ◽  
Massimo Spisni
Keyword(s):  
Real Estate ◽  
Mutual Fund ◽  
Negative Impact ◽  
Balance Sheet ◽  
Market Value ◽  
Relative Effect ◽  
Content Type ◽  
Management Fees ◽  
Performance Fees ◽  
Asset Value

Purpose – The aim of this paper is to focus on different compensation structures for real estate mutual fund Management Companies and assess whether management fees paid on either Net Asset Value (NAV) or Gross Asset Value (GAV) generate distorted incentives relative to those generated by performance fees paid on the market value of the fund. Design/methodology/approach – To test whether management fees induce Management Companies to opportunistic behaviors, the relative effect of NAV- and GAV-based fees is compared over time using a plethora of econometric models. Findings – It is found that Management Companies that are paid GAV-based fees start with higher leverage to expand assets under management, then, subsequently, drive leverage and over-investment down as fund maturity approaches to minimize the negative impact of negative NPV investments on the final market value of the fund and therefore on performance fees paid at maturity. Research limitations/implications – A dataset of Italian listed real estate mutual funds is used. While the Italian market can be considered an ideal setting for an empirical analysis, studies on other countries would make it possible to test implications of the model that are only weakly identified in our setting. Practical implications – Results could be important when designing managerial contracts. Originality/value – It is shown that Management Companies actively manage the size of their balance sheet to maximize fees, and that NAV-based fees produce effects similar to market-based fees in terms of managerial incentives.

scholarly journals An Analysis of Mutual Fund Managers’ Timing Abilities - Evidence From Chinese Equity Funds

2020 ◽  
Vol 11 (4) ◽  
pp. 214
Author(s):  
Jun-Hao Li ◽  
Chun-Fan You
Keyword(s):  
Mutual Fund ◽  
Stock Selection ◽  
Mutual Fund Managers ◽  
Fund Managers ◽  
Timing Ability ◽  
Daily Frequency ◽  
Equity Funds ◽  
Volatility Timing ◽  
Investment Styles ◽  
Timing Models

This paper examines Chinese mutual fund managers’ market, volatility, and liquidity abilities. Using a daily frequency sample of Chinese open-end equity funds from 2015 to 2019, we find evidence that mutual fund managers can time the market. Among the funds with different investment styles, the active funds have better market and liquidity timing ability, whereas the steady funds have better volatility timing ability. In different investment periods, there are more funds with timing ability in the fall period than in the rise period. We find the same results in the market (T-M), volatility, and liquidity timing models. It is especially for the active funds, nearly half of which have liquidity timing ability in the fall period. Among the funds with stock selection ability, the funds with market timing ability can outperform than the funds with other timing ability.

scholarly journals Tail Risk and the Cross-Section of Mutual Fund Expected Returns

2018 ◽  
Vol 54 (1) ◽  
pp. 425-447 ◽  
Author(s):  
Nikolaos Karagiannis ◽  
Konstantinos Tolikas
Keyword(s):  
Risk Factors ◽  
Cross Section ◽  
Risk Premium ◽  
Mutual Fund ◽  
Market Risk ◽  
Expected Returns ◽  
Adequate Explanation ◽  
Tail Risk ◽  
Management Fees ◽  
The Cross

We test for the presence of a tail risk premium in the cross-section of mutual fund returns and find that the top tail risk quintile of funds outperforms the bottom by 4.4% per annum. This premium is not simply a reward for market risk, nor do commonly used risk factors offer an adequate explanation. Our findings hold across double-sorted portfolios formed on tail risk and a number of fund characteristics. We also find that funds susceptible to tail risk tend to be small, young, have high management fees, and have managers who do not risk their own capital.

Investor reactions to socially responsible investment

2015 ◽  
Vol 53 (3) ◽  
pp. 571-604 ◽  
Author(s):  
Carmen Pilar Martí-Ballester
Keyword(s):  
Mutual Fund ◽  
Fixed Effects ◽  
Time Horizon ◽  
Pension Plan ◽  
Pension Plans ◽  
Socially Responsible Investment ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Management Fees

Purpose – The purpose of this paper is to analyze investor reactions to ethical screening by pension plan managers. Design/methodology/approach – The author presents a sample consisting of data corresponding to 573 pension plans in relation to such aspects as financial performance, inception date, asset size, number of participants, custodial and management fees, and whether their managers adopt ethical screening or give part of their profits to social projects. On this data the author implements the fixed effects panel data model proposed by Vogelsang (2012). Findings – The results obtained indicate that investors/consumers prefer traditional or solidarity pension plans to ethical pension plans. Furthermore, the findings show that ethical investors/consumers are more (less) sensitive to positive (negative) lagged returns than caring and traditional consumers, causing traditional consumers to contribute to pension plans that they already own. Research limitations/implications – The author does not know what types of environmental, social and corporate governance criteria have been adopted by ethical pension plan managers and the weight given to each of these criteria for selecting the stock of the firms in their portfolios that could influence in the investors’ behaviour. Practical implications – The results obtained in the current paper show that investors invest less money in ethical pension plans than in traditional and solidarity pension plans; this could be due to the lack of information for their part. To solve this, management companies could increase the transparency about their corporate social responsibility (CSR) investments to encourage investors to invest in ethical products so these lead to raising CSR standards in companies, and therefore, sustainable development. Social implications – The Spanish socially responsible investment retail market is still at an early phase of development, and regulators should promote it in order to encourage firms to adopt business activities that take into account societal concerns. Originality/value – This paper provides new evidence in a field little analysed. This paper contributes to the existing literature by focusing on examining the behaviour of pension funds investors whose investment time horizon is in the long-term while previous literature focus on analysing behaviour of mutual fund investors whose investment time horizon is in the short/medium term what could cause different investors’ behaviour.

The Total Expense Ratio: The Reality of Distribution Fees—“Behind the Mutual Fund Curtain”

2018 ◽  
Keyword(s):  
Transaction Costs ◽  
Mutual Fund ◽  
Revenue Sharing ◽  
Status Quo ◽  
Independent Directors ◽  
Expense Ratio ◽  
Management Fees ◽  
Strong Action ◽  
Fund Industry ◽  
To Receive

This study uses the portion of a new Total Expense Ratio construct that discloses the reality of adviser/distributor payments of hidden distribution fees to sales brokers “behind the mutual fund curtain.” Distribution fees consist of dealer (broker) concessions, account servicing (12b-1 fees), types of revenue sharing payments, and soft-dollar trades. Distribution fees are one of four categories in the Total Expense Ratio, the others being (1) management fees, (2) “other” expenses, and (3) transaction costs. Adoption of the complete Total Expense Ratio with normative transparency of disclosure followed by prohibition of 12b-1 fees, revenue sharing payments, and soft-dollar trading requires strong action by fund independent directors, the fund industry, and most importantly, by Congress and the SEC. Only a few fund advisers are likely to join in this effort to change their very profitable status quo. However, as the article maintains, fund shareholders deserve to receive their “fiduciary protections” under the law and the TER may be useful in this regard.

scholarly journals How Rational and Competitive Is the Market for Mutual Funds?*

2019 ◽  
Vol 24 (3) ◽  
pp. 579-613 ◽  
Author(s):  
Markus Leippold ◽  
Roger Rueegg
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Null Hypothesis ◽  
Economies Of Scale ◽  
Management Fees ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
Traditional Risk Factors ◽  
The Impact ◽  
Higher Sensitivity

Abstract To explore the rationality and competitiveness of the mutual fund industry, we analyze the alpha of active and index mutual funds from a global sample of more than 60,000 equity and fixed income funds and test the null hypothesis that alphas to investors are zero. We distinguish between institutional and retail investors since there are significant differences in management fees, economies of scale, and information asymmetries between these two groups. Using a new robust statistical test, we cannot reject our null hypothesis for the majority of investment categories. We find that the average active fund has less exposure to traditional risk factors, but higher sensitivity to alternative risk premia. Fund persistence and the impact of size and fees add further support to our conclusion that the mutual fund industry is highly competitive, except for US domestic funds. This set of funds is excessively overfunded compared with other fund categories.

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