Impact of COVID-19 on the performance of emerging market mutual funds: evidence from India

The purpose of this paper is to examine the widely believed beating capacity of actively managed funds during the market downturn. This popular hypothesis has been tested with the performance of Indian Equity Mutual Funds during the pandemic period. The conditional alphas are estimated using lagged instrumental variables with the fixed effect/LSDV estimator and the sys-GMM estimator in contrast to the OLS estimation from a sample of 1271 schemes for 5 months from 1st March 2020 to 31st July 2020. The study’s findings indicate that the actively managed Indian mutual fund co-moves with the market and does not possess the ability to beat the market. The major implication comes from the application of fixed effect and GMM estimators for the performance evaluation of Indian Mutual Funds’ during the crisis period, and it serves the investors in deciding the profitable investment opportunities.

Effects of human capital and fund characteristics on mutual fund performance in Malaysia

Background: The evolution of the mutual funds industry has changed investors’ perspective. Instead of just focusing on which fund performances are best, investors pay great attention to who is managing and delivering superior returns in their investment portfolios. Nonetheless, it is very scant of comprehensive studies concern with human capital managerial characteristics that link with fund performances. Hence, this study proposes the integration of fund performances, managerial characteristics, systematic risk, expense, and turnover ratio, with single and simultaneous equations based on asset pricing models. Methods: Using a sample of Malaysian fund managers, data from fund management companies, Thomson One database, and fund master prospectus over the periods of January 2012 to December 2014, the fund performance was measured using Jensen alpha (CAPM single factor), and Fama and French three-factor model on single and simultaneous equations. The examination was further carried out by employing the ordinary least squares and three-stage least squares methods. Results: The results suggest that for fund managers, holding a business degree was the key factor to determine the fund performance, while having Master’s degree was not the primary concern. Fund performance and risk behavior varied across fund managers of different gender. Conclusions: The expense ratio, turnover ratio, and fund objective were significantly correlated with fund performance. This study provides ultimate implications for fund management companies, when it comes to the efficient allocation of human capital. Fund management companies should focus more on the team-managed funds phenomenon, instead of on single-managed funds. Overall, this study provides significant guidance for the Malaysian Securities Commissions and fund management companies, to develop a more competent funds market in Malaysia. Specifically, by strengthening the fund industry policies, the typical agency problems, such as too-high managerial expenses, and excessive risk-taking can be alleviated.

The new gatekeepers of financial claims: States, passive markets, and the growing power of index providers

Since the financial crisis there has been a massive shift from actively managed funds to passive funds that merely replicate financial indexes. Instead of active investors influencing states through their investment decisions, in this new economic reality the locus of agency is shifting from investors towards index providers as they decide which companies and countries are included into key benchmark indexes. We argue that the major index providers (MSCI, S&P Dow Jones and FTSE Russell) exercise growing private authority as they steer capital via their indexes. Index providers have become crucial intermediaries in the relationship between states and investors. Through producing widely used indexes, index providers essentially provide a crucial infrastructure that enables the creation and trading of increasingly passively allocated financial claims. Through the infrastructural power they derive from this gatekeeper position, index providers are able to ‘standardise’ the issuers of capital claims and the countries in which these issuers reside through determining the criteria that corporations and states, especially emerging markets, have to fulfil to qualify for index membership – and consequently asset allocation. This chapter therefore investigates the relationship between states and index providers and the latter’s influence on issues of domestic financial regulation, investor access and international capital flows.

Long-Term Sustainable Investment for Retirement

We consider whether sustainable investment can deliver performance comparable to conventional investment in investors’ long-term retirement plans. On the capital markets, sustainable investment can be achieved through various instruments and strategies, one of them being investment in mutual funds that subscribe to ESG (environmental, social, and governance) principles. First, we compare the investment performance of ESG funds with matched conventional funds over the period 1994–2020, in Europe and the U.S. We find no significant evidence of differing performance (at 5% level) despite using a number of investment performance metrics. Second, we perform a historical backtest to model a UK personal retirement plan from 2000 till 2020, taking full account of investment management fees and transaction costs. We find that investing in an index-tracker fund overlaid with ESG screening delivers a pension which is 10.4% larger than is achieved if the index-tracker fund is used without screening. This is also 20.2% larger than is achieved by investing in a collection of actively managed funds with a sustainable purpose. We conclude that an ESG-screened long-term passive investment approach for retirement plans is likely to be successful in satisfying the twin objectives of a secure retirement income and of sustainability.

Selection of stock funds using information that is not observable or measurable

ABSTRACT The aim of this paper is to investigate whether the flows and the future returns of stock funds are related to investors’ unobservable information. This article extends the knowledge about investment decisions regarding stock funds and considers a representation of unobservable information that until now has not been contemplated by the Brazilian literature. Understanding decisions to invest in stocks has become more important since the fall in interest rates and migration toward equity investments. The use of unobservable information for making investment decisions is important when choosing stock funds and the return gap could be added to the list of information offered to investors. The return gap measures the value added by managers in relation to the most recently disclosed complete lagged portfolio and was calculated every month for every asset in the portfolios of every fund in the sample disclosed with a three-month lag. A parsimonious sample was used of 22 actively managed funds in the period from January of 2010 to December of 2018, containing one from every one of the 22 biggest independent Brazilian managers, because it is laborious to calculate this metric. The return gap represents unobservable information about a fund. Investors that direct their capital toward stock funds with a higher historical return gap tend to obtain higher returns in out-of-sample tests, suggesting persistence of the returns of these funds and supporting the importance of unobservable information. Investors that directed their capital toward funds with lower historical return gaps could also obtain positive alphas in some cases, indicating that some managers were neglected. The fund flow results were inconclusive.

Active Funds and Bundled News

We use trade-level data to examine the role of actively managed funds (AMFs) in earnings news dissemination. We find AMFs are drawn to, and participate disproportionately more in, earnings announcements (EAs) that include bundled managerial guidance. When the two pieces of news are directionally inconsistent, AMFs trade in the direction of future guidance rather than current earnings. AMFs exhibit an ability to discern, and adapt their trading to, the bias in bundled guidance. While AMF trades at EAs are generally more profitable than their non-EA trades, this result reverses when guidance bias is extreme. Overall, we find increased AMF trading during EAs leads to faster price adjustment. Collectively, these findings suggest AMFs are sophisticated processors of bundled earnings news, and their trading generally improves market price discovery.

Rozhodný limit a jeho přesažení

This paper deals with a relevant threshold, occurs of exceeding and calculations of asset value of investment funds or other managed assets that are managed. The paper also focuses on the process of the manager when there is exceeded the relevant threshold without authorization from Czech National Bank. Managers shall constantly assess the overall value of the managed funds and other managed asset and should provide an appropriate mechanism warning especially with regard to risk management. The aim of the paper is a deeper analysis of the term relevant threshold, to which subjects it applies and how it can be calculated.

True Expense Ratio and True Alpha of Imperfect Diversification: Evidence from Stock Market in Bangladesh

Actively managed funds try to outperform by deviating from passive benchmarks such as the S&P 500, leading to imperfect diversification and higher idiosyncratic volatility. The idiosyncratic volatility imposes an additional cost to the shareholders. In this study, using data of all the closed-end mutual funds listed with Dhaka Stock Exchange (DSE) from 2012 to 2019, I have attempted to quantify this higher idiosyncratic volatility as an additional expense on the portfolio and then estimate true expense ratio and true net alpha of the actively managed funds as a new measure for imperfect portfolio diversification. The study finds that mean volatility cost of the funds is 1.42% which is on an average around 89% of the explicit expense ratio and the findings that volatility costs are not strongly correlated with other performance measures such as Sharpe, Treynor or information ratios provides additional information about the fund performance. Moreover, when volatility cost is adjusted to traditional Jensen alpha measure to find a true net alpha of the funds, rankings of the funds significantly change and two alpha measures are not strongly positively correlated, suggesting new information about the fund performance.