A COMPARATIVE STUDY ON THE PERFORMANCE OF NIFTY 50 AND EQUITY FUNDS UNDER TIER-II OF NATIONAL PENSION SCHEME

The National Pension Scheme (NPS) is a defined contribution and a corporate pension fund that provides financial assistance to all Indian citizens. There are two types of accounts in the National Pension Scheme: Tier I and Tier II. Tier I is a mandatory deposit pension fund account and Tier II is a voluntary pension account. Tier I and Tier II is are consisted of different assets namely, equity, government security and alternative asset. The equity schemes are directly linked with the market. The return of all the fund managers in equity schemes are not same as the portfolio of all the fund managers are not same. Secondary data has been collected from respective websites of Pension Fund Managers and has been used to calculate mean, SD, Variance, and Correlation to predict the performance of equity funds. ANOVA and T-test have been for assessing the comparative analysis of the different fund managers under equity scheme in tier II. As per the study, LIC PF and ICICI PF are the best performer during the study period. The performance of SBI PF is poor among other equity funds under Tier-II of NPS during the study period. In term of risk, LIC PF is the higher risky equity fund and UIT PF is the lowest risky equity fund under Tier-II of NPS. It can be said that investors need to be high-risk taker to invest in that LIC PF. Through the risk analysis during said period of time, it is found that the ability to observe risk differs in equity funds under Tier-II of NPS. The main reason for this being a voluntary account of Tier -II. As there is no lock-in period in this account, the investors mostly use for a short-term purpose. In the recent decision of the government, Tier-II offers a lock-in period for 3 years with tax benefit. This decision may be affected the investment pattern of the investors. KEY WORDS: - National Pension Scheme, Performance, Equity Scheme, Nifty 50

You Learn When It Hurts: Evidence in the Mutual Fund Industry

This paper aims to contribute to the lack of research on the learning process of mutual fund markets. The empirical design is focused on the ability of the Spanish equity mutual fund industry to learn from its important errors. The choice of this industry is justified by both its relevance in the European mutual fund markets and some specific characteristics, such as the concentration and the banking control of the industry, which may affect the learning process. Our main objectives are to identify important trading errors in mutual fund management by applying three independent filters based on the relative importance of each decision, and then testing the evolution of these errors both at the industry level and at the fund family level. We apply the dynamic model of generalized method of moments (GMM), and we find an overall significant decrease in the percentage of important trading errors over time, thereby providing evidence of the global learning process of the industry. In addition, we find that a large number of fund families drive this evidence. Finally, we obtain that the family size and its dependence on financial groups do not seem to play significant roles in explaining the learning process. Therefore, we conclude that fund managers have incentives to learn from their important trading errors, in order to avoid them in future decisions, due to their serious negative consequences on fund performance, regardless of the characteristics of the families to which they belong.

Social interactions and mutual fund portfolios: the role of alumni networks in China

PurposeThis paper aims to investigate the influence of social interactions on mutual fund portfolios from the perspective of alumni network in China.Design/methodology/approachBased on a data set that consists of 162 actively managed equity funds in China during the time period of 2003–2014, this study employs multiple linear regression model to control for organization- and location-based interpersonal connections as well as other confounding factors and clarify the causality relationship between alumni networks of mutual fund managers and their portfolios.FindingsAfter controlling for organization- and location-based interpersonal connections, we find that mutual fund managers who graduated from the same college/university have more similar stock holdings and are more likely to buy or sell the same stocks contemporaneously. As a result, alumni managers exhibit a higher correlation of fund returns. Moreover, the effect of alumni relationship on mutual fund investments becomes weaker when more managers are connected within the network. We also find that valuable information is shared among alumni managers: (1) the average returns for the alumni common holdings portfolios is significantly higher than those for non-alumni holdings portfolios and (2) a long-short strategy composed of stocks purchased minus sold by alumni managers yields positive and significant risk-adjusted returns.Practical implicationsThe findings suggest that information dissemination among connected fund managers could be one of the driving forces for mutual fund herding behavior, and that a portfolio of funds whose managers are educationally connected could be highly exposed to certain stocks and risks.Originality/valueThis paper contributes to the growing finance literature addressing the influence of personal connections on information dissemination that specifically contributes to price formation. It corresponds more closely to Cohen et al. (2008), who investigate college alumni connections between fund managers and corporate board members. Since the authors simultaneously examine three potentially overlapped social networks, which are based on education, locality and fund family, the authors are able to disentangle their effects on fund managers' investment decisions. Moreover, the findings suggest that institutional investors make investment decisions based on share private information, and therefore, it also contributes to the literature on fund herding behaviors (Grinblatt et al., 1995; Wermers, 1999).

Can market state and market volatility explain time-varying momentum profits in South Africa?

PurposeWhile the momentum anomaly is prevalent in South Africa, few have examined the reasons influencing it. This study examines whether momentum profits vary through time and are affected by the state of the market and market volatility between 1998 and 2019.Design/methodology/approachThe authors consider combinations of portfolio construction, such as the lookback period, weighting scheme, measure of volatility and the volatility window period. They further examine the interaction of momentum with sentiment, default risk and semi-deviation as a measure of risk, as a means of testing whether behavioural factors have significant influence.FindingsThe results generally show that neither volatility nor market state has explanatory power on momentum profits.Originality/valueThese results make the momentum anomaly in South Africa an even greater mystery than before as they do not conform to the existing literature from developed economies. The authors do, however, find that default risk is a significant predictor of momentum profits, which is a useful additional factor for those fund managers who utilise momentum strategies. This implies that a fundamental factor, default risk, is a potential explanation for the market-related momentum anomaly.

Optimization of the impact measurement of market structure on liquidity and volatility

Liquidity and volatility are the two barometers that allow stock markets to appreciate in terms of attractiveness, profitability and efficiency. Several macroeconomic and microstructure variables condition the level of liquidity that directly impact the asset allocation decisions of different investor profiles − institutional and individuals − and therefore the dynamics of the market as a whole. Volatility is the regulatory component that provides information on the level of risk that characterizes the market. Thus, the appreciation of these two elements is of considerable help to fund managers looking to optimize their equity pockets. In this work, we will use the liquidity ratio as a proxy variable for the liquidity of the Moroccan stock market, to estimate the indicators and factors that determine its short- and long-term variability. The appropriate econometric method would be to estimate an error correction vector model (ECVM) which has the property of determining the long- and short-term relationships between the variables. The volatility of the MASI index will be the subject of a second estimate to capture the shape of the function of its evolution.

Optimal portfolios for the DC pension fund with mispricing under the HARA utility framework

<p style='text-indent:20px;'>This paper studies the optimal portfolio selection for defined contribution (DC) pension fund with mispricing. We adopt the general hyperbolic absolute risk averse (HARA) utility to describe the risk performance of the pension fund managers. The financial market comprises a risk-free asset, a pair of mispriced stocks, and the market index. Using the dynamic programming approach, we construct the Hamilton-Jacobi-Bellman (HJB) equation and obtain the explicit expressions for optimal portfolio choices with two methods. Finally, numerical analysis is presented to illustrate the sensitivity of the optimal portfolios to parameters of the financial market and contribution process. <b>200</b> words.</p>

Why do Fund Managers Increase the Lottery-Like Characteristics of the Fund?

We investigate why fund managers invest in lottery-like stocks and whether the behavior that holds more lottery-like stocks affects performance. First, mutual funds that hold more lottery stocks may attract more fund flows. Our results support the theory that fund managers invest more in lottery-like stocks to reflect investors' preferences for extreme payoffs. Second, the level of lottery-like characteristics of mutual funds does not predict managers’ skill and performance. Therefore, fund managers holding more lottery stocks is not a result of managers’ skills. Third, lottery-like characteristics of mutual funds do not significantly affect performance in specific reporting periods (e.g., year-end or quarter-end). Based on this result, we conclude that fund managers do not invest more in lottery stocks to advance their career.

Information Flow from COVID-19 Pandemic to Islamic and Conventional Equities: An ICEEMDAN-Induced Transfer Entropy Analysis

With the steady growth in the data set on the COVID-19 pandemic, empirical works that employ novel and yet appropriate statistical techniques to corroborate previous findings of the pandemic and its consequences on financial markets are necessary. This paper examined the impact of COVID-19 information flow on the Islamic and conventional equities within the short-, mid-, and long-term horizons to assess possible diversification prospects in the era of the pandemic. To the studied equities markets, a novel technique based on a denoised frequency-domain entropy paradigm was applied. The operability of entrenched market dynamics in the long-term horizon of the COVID-19 pandemic period is reinforced by the results. The findings divulge diversification opportunities between Islamic and conventional equities in the short- and mid-term periods of the COVID-19 pandemic. The risks on equities from Japan or Bahrain could be diversified by equities from Jordan in the short-term, while in the intermediate-term stocks from Japan could diversify with the UAE and USA equities. The results imply that it is imperative for investors and fund managers to employ portfolio management techniques that show how to use benefits together with risk prevention and management across distinct time scales.

THE STRATEGIC ROLE OF PRIVATE EQUITY IN THE INTERNATIONALIZATION OF ITALIAN SMEs

The internationalization of the portfolio company is a key strategy used by private equity (PE) investors to create value and produce returns. In recent years, the focus on the strategies for value-creation through operational improvement has become essential to achieve the exponential growth required to the portfolio company, given the low multiples and the market risk of leverage. In this paper, we define the key types of contribution that a PE investor can provide in order to support the internationalization process and their effects on the portfolio company’s performance. The research is based on a survey administered to 47 PE fund managers, which covers 156 deals involving Italian companies. The results offer insight into the contribution to the corporate governance, strategy and management that PE provides in addition to the monetary support. The findings show that the non-financial support given to the portfolio companies has a positive impact on the performance and that the most impactful contribution the PE can give is the support to the relational network when the company strategy involves a foreign direct investment.