Returns and Asset Allocation of Effects on Int’l Equity Fund Flows

Given that sustainable investing constitutes a major force across global financial markets, in 2016 Morningstar began reporting Morningstar Sustainability scores. We used the 2016, 2017 and 2018 scores to study the effects of socially responsible investments (SRI) on European equity fund performance. Sustainability scores impacted positively on performance, which was consistent with the idea that the mutual funds invested in companies with better scores generate better risk-adjusted and not-risk adjusted performance. We also tested the relation on mutual fund flows and risk. The sustainability score in the previous year is significant on the flows, so higher-rated funds receive a larger volume of funds. In terms of risk, the level of sustainability is negatively related to the value at risk (VaR) of the fund, supporting that higher scored mutual funds offer better protection against extreme losses.

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Can mutual fund flows serve as market risk sentiment?

The Journal of Risk Finance ◽

10.1108/jrf-08-2016-0103 ◽

2017 ◽

Vol 18 (2) ◽

pp. 159-185 ◽

Cited By ~ 1

Author(s):

Hsin-Hui Chiu ◽

Lu Zhu

Keyword(s):

Mutual Fund ◽

Risk Perceptions ◽

Money Market ◽

Fund Flows ◽

Equity Fund ◽

Content Type ◽

Market Sentiment ◽

Money Market Funds ◽

Primary Driver ◽

Mutual Fund Flows

Purpose This paper aims to examine the information content of mutual fund flows and its indication on investors’ preference/tolerance toward risk. Design/methodology/approach Mutual funds are grouped into different categories based on assets with different levels of risk perceptions (e.g. equity fund, money market fund), and this information is publicly accessible. This paper examines the correlation patterns between fund flows and changes in credit default swaps (CDS) spreads. In addition, it also examines such a relation by dividing the samples into different fund types (e.g. retail vs institutional fund flows). Findings This paper suggests that equity fund flows are negatively related to CDS spreads, whereas money market fund flows are positively related to CDS spreads. Furthermore, it indicates that retail fund flows provide insightful information and serve as the primary driver behind the relation between fund flows and CDS spreads. Originality/value The findings of this paper indicate that flows into equity and money market funds could serve as a risk sentiment in credit markets. And this is the first study, to the best of the author’s knowledge, to establish such a linkage between fund flows and CDS spreads to help investors gauge credit market sentiment.

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Institutional Investor Expectations, Manager Performance, and Fund Flows

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109017000850 ◽

2017 ◽

Vol 52 (6) ◽

pp. 2755-2777 ◽

Cited By ~ 5

Author(s):

Howard Jones ◽

Jose Vicente Martinez

Keyword(s):

Asset Allocation ◽

Institutional Investors ◽

Investment Decisions ◽

Fund Flows ◽

Past Performance ◽

Fund Managers ◽

Future Performance ◽

Manager Performance ◽

The Impact ◽

Allocation Decisions

Using survey data, we analyze institutional investors’ expectations about the future performance of fund managers and the impact of those expectations on asset allocation decisions. We find that institutional investors allocate funds mainly on the basis of fund managers’ past performance and of investment consultants’ recommendations, but not because they extrapolate their expectations from these. This suggests that institutional investors base their investment decisions on the most defensible variables at their disposal and supports the existence of agency considerations in their decision making.

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Volatility Contagion across the Equity Markets of Developed and Emerging Market Economies

Macroeconomic Shocks and Unconventional Monetary Policy ◽

10.1093/oso/9780198838104.003.0005 ◽

2019 ◽

pp. 99-117

Author(s):

Masazumi Hattori ◽

Ilhyock Shim ◽

Yoshihiko Sugihara

Keyword(s):

Financial Crisis ◽

Global Financial Crisis ◽

Emerging Market ◽

Equity Markets ◽

Emerging Market Economies ◽

Fund Flows ◽

Equity Fund ◽

Market Economies ◽

Developed Economies ◽

The Global Financial Crisis

Using variance risk premiums (VRPs) nonparametrically calculated from equity markets in selected major developed economies and emerging market economies (EMEs) over 2007–15, this chapter documents the correlation of VRPs across markets, examining whether equity fund flows work as a path through which VRPs spill over globally. It finds that VRPs tend to spike up during market turmoil such as the peak of the global financial crisis and the European debt crisis; that all cross-equity market correlations of VRPs are positive, and that some economy pairs exhibit high levels of the correlation. In terms of volatility contagion, it finds that an increase in US VRPs significantly reduces equity fund flows to other developed economies, but not those to EMEs, following the global financial crisis. Two-stage least squares estimation results show that equity fund flows are a channel for spillover of US VRPs to VRPs in other developed economies.

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Fund Flows as Country Allocator

The Journal of Alternative Investments ◽

10.3905/jai.2018.21.3.087 ◽

2019 ◽

Keyword(s):

Size Effect ◽

Fund Flows ◽

Momentum Effect ◽

Equity Fund ◽

Holding Period

In this article, the authors find significant positive returns over a forward one-month holding period for strategies that buy in countries that have attracted indirect investment via equity fund flows and sell in countries that have not. They find that the profitability of these strategies is independent of the momentum effect as well as the size effect.

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