Do visiting monks give better sermons? An analysis of the foreign experience of Chinese fund managers

Abstract

This paper investigates the value of foreign experience in the investment community of developing countries. By using fund flows as a proxy for investor preference, we demonstrate that fund managers with foreign experience gain more recognition from investors in China. However, this preference is more likely to be a sort of bias since we find no evidence of superior investment skills of these managers, especially when they tilt portfolio allocations in domestic equities. The findings in our paper imply that investors in emerging markets are under the foreign experience illusion and that foreign experience can add to human capital in the mutual fund industry via increasing the popularity rather than improving the return performance of a fund.