The Nexus Between Hedge Fund Size and Risk-Adjusted Performance

This paper explores the relationship between hedge fund size and risk-adjusted performance employing a data sample of 245 US hedge funds classified into eight different investment strategies. The studied period spans from January 2005 to February 2021, with calculations performed both on the whole coverage period as well as three sub-periods, to isolate the pre-crisis, crisis, and post-crisis funds’ behavior. Similar to previous evidence found in the literature, the results reveal an inverse relationship between hedge fund size and risk-adjusted performance (as measured by the Sharpe, Treynor and Black-Treynor ratios) in most of the cases.

Regime-Switching Determinants of Mutual Fund Performance in South Africa

This study assesses the effect of fund-level and systemic factors on the performance of mutual funds in the context of changing market conditions. A Markov regime-switching model is used to analyze the performance of 33 South African equity mutual funds from 2006 to 2019. From the results, fund flow and fund size exert more predictive influences on performance in the bearish state of the market than in the bullish state. Fund age, fund risk, and market risk were found to be the most significant factors driving the performance of active portfolios under time-varying conditions of the market. These variables exert more influence on fund performance under bearish conditions than under bullish conditions, emphasizing the flight-to-liquidity assets phenomenon and risk-aversion behavior of fund contributors during unstable conditions of the market. Consequently, fund managers need to maintain adequate asset bases while implementing policies that minimize dispersions in fund returns to engender persistence in performance. This study provides novel perspectives on how the determinants of fund performance change with market conditions as portrayed by the adaptive market hypothesis (AMH).

Do Fund Size, Style and Rating Explain Performance?

The purpose of this quantitative investigation was to examine whether performance (1-Year, 3-Year, and 5-Year annual returns) differences exist among fund categories by size and style (large-cap growth, large-cap blend, mid-cap growth, and small-cap growth) and fund ratings (5-Star and 4-Star) controlling covariate variables (standard deviation, turnover rate, and top-10 holding) of the United States equity MFs. Morningstar Inc. provided an insightful measure of fund performance annual returns and fund efficacy ratings. The study utilized the Analysis of Covariance and Multivariate Analysis of Covariance methods. The investigation revealed that the large-cap growth fund category produced superior annual returns than other fund families. The five-star-rated funds performed better than the four-star-rated funds. Turnover and top-10 percentage asset holdings had a statistically significant effect on fund annual performance. Investors and asset managers should consider the fund style, size, fund ratings for making short-term, medium, and long-term financial investment decisions. Keywords: mutual fund, fund style, fund size, fund ratings, market return

Risk Mutualization in Central Clearing: An Answer to the Cross-Guarantee Phenomenon from the Financial Stability Viewpoint

Central counterparties’ (CCPs) role is to take over the counterparty risk during trading. To fulfill its role, a CCP needs to operate a multi-level guarantee system that can absorb losses of clearing members’ defaults. Our main question is how the size of the guarantee system changes and how the cross-guarantee undertaking changes between clearing members and markets if the CCP merges the guarantee systems of different markets. This question is essential from a financial stability perspective since the size and the structure of the guarantee system will affect the loss-absorbing capacity of a CCP. We used Monte Carlo simulation to simulate a 30 year time-series for three different products, which gave us the basis for the value-at-risk-based margin calculation and the stress-test-based default fund calculation. Results show that merging the guarantee systems will always decrease the total value of the guarantees because the margin will decrease, which cannot be offset by the increase in the default fund size. We conclude that it is not optimal from the financial stability perspective to merge the guarantee systems. However, if the CCP wants to provide cheaper services, or if the clearing members are willing to cross-guarantee each other, merging is more suitable.

Kinerja Investasi Exchange Trade Fund di Indonesia

The aim of this research is to obtain empirical evidence about the effect of stock selection skills, market timing ability, fund size and fund age on the performance of exchange trade funds. The population in this study are all exchange trade fund investment products listed on the Indonesia Stock Exchange from 2017 to 2019. The sampling technique uses purposive sampling. To test the hypothesis, multiple linear regression analysis was used. This study proves that stock selection skills have a positive effect on the performance of exchange trade funds in Indonesia. Meanwhile, market timing ability, fund size and fund age do not have a positive effect on the performance of exchange trade funds in Indonesia. The reason is that only one investment manager PT. Indo Premier Investment Management which is always active in trading exchange trade funds in Indonesia. This research has implications for the more active investment managers in offering exchange trade fund products to attract investors because they are able to survive in times of crisis. Keywords: Exchange Trade Funds; Investation.

Analysis of the Effect of Asset Allocation on Portfolio Performance with Diversification as an Intervening Variable

This study aims to analyze the effect of asset allocation on portfolio performance with diversification as an intervening variable in the Pension Fund, a non-bank financial institution that manages the pension program and is registered and supervised by the Financial Services Authority (OJK) in the 2016-2019 period. A total of 34 Pension Funds were sampled so that the total sample was 136 in the 2016-2019 period. Data analysis using Structural Equation Modeling (SEM). The results showed that Selection Ability and Fund Size had a significant effect on Diversification, while Timing Ability had a significant effect on Portfolio Performance. Intervening test using Sobel Test shows that Diversification has not been able to mediate Asset Allocation on Portfolio Performance.

The Prediction of Venture Capitalists' Investment Propensity Using Machine Learning

This paper describes the most visible data science methods suitable for entrepreneurial research and provides links to literature and big data resources for venture capitalists. In the results, first, all organizational characteristics such as the characteristic of parent company of VC, the fund size of VC, and the reputation of VC, have significant influences on the risk-taking investment of venture capitalists, while functional background, school prestige, and VC experience except educational level among individual characteristics have significant influences on the risk-taking investment of venture capitalists. Second, for the full model, the accuracy rate is 0.855, which implies that the error rate is 0.145. Among the venture capitalists who are predicted not to do risk-taking investment, the accuracy that would not do risk-taking investment is 85.75%, and the accuracy that do risk-taking investment is 79.59% among the venture capitalists who are predicted to do risk-taking investment.

A Study on the Style Investment of Equity Funds

We classify “fund style” by the fund name and conduct a portfolio-based style analysis. The main results are as follows. First, the proportion of value-style and dividend-style funds is very high compared to other style types in active funds. Second, managers tend not to adhere strictly to the fund style classified by the fund name. Interestingly, the smaller the fund size, the weaker the style characteristics. This result suggests that the management industry neglects small funds and does not fulfill its fiduciary duty. Third, we find that the persistency of the growth style is far behind the value style, and both winner and loser styles have the lowest persistency among all styles. Fourth, timing abilities for market factor, size factor, and value factor are not observed in general, but the timing ability for momentum factor is significantly observed in the active fund group. Fifth, we define artificial fund styles with consistent style investment strategy and compare those with the actual fund styles. We find that the risk of artificial types is generally lower than that of actual types and that several artificial types dominate real types due to higher returns and smaller risks.

Venture Capitalists' Access to Finance and Its Impact on Startups

Although an extensive literature shows that startups are financially constrained and that constraints vary by geography, the source of these constraints is still relatively unknown. We explore intermediary financing constraints, a channel studied in the banking literature, but only implicitly addressed in the venture capital (VC) literature. Our empirical setting is the VC fundraising and startup financing environment around the passage of the Volcker Rule, which restricted banks' ability to invest in venture capital funds as limited partners (LPs). The rule change disproportionately impacted regions of the U.S. historically lacking in VC financing. We find that a one standard deviation increase in VCs' exposure to the loss of banks as LPs led to an 18% decline in fund size and about a 10% decrease in the likelihood of raising a follow-on fund. Startups were not completely cushioned from the additional constraints on their VCs: capital raised fell and pre-money valuations declined. Overall, VC financing constraints manifest as fewer, smaller funds that change investment strategy and ex- perience increases in bargaining power. Last, we show that the rule change increased the likelihood startups moved out of impacted states, thus exacerbating the geographic disparity in high-growth entrepreneurship.