Performance of Equity Mutual Fund and Educational Credentials of Fund Manager

Abstract

The investors of mutual funds can reduce their selection risk by selecting the mutual funds based on certain criteria. One such criterion could be the educational credentials of fund managers. The present study has examined whether performance of mutual funds could be attributed to differentials in educational credentials of fund managers and thereby can provide necessary signals to investors. The study has compared performance and investment strategy of fund managers having management degree from premier management institutions with others having CA/CFA/ICMA qualification. The results show that the performance between these two groups of fund managers does not differ significantly. However, the difference in performance became significant after controlling for various fund characteristics, such as size, expense ratio, liquidity ratio and flow of funds. This suggests that the relation between fund performance and educational credentials may be moderated by control variables. The results showed that the fund managers with a premier management degree were performing better than the other group and that they also followed a more extreme investment strategy. Further, the study has examined whether the relation between educational credentials of fund managers and performance and investment strategy has been impacted by different time periods of economic cycle. The examination in different sub-periods of economic cycle provided better performance of fund managers with premier management education, particularly during crisis period of economy. This performance differential due to educational credentials during the crisis period have been independent of the investment strategy of fund managers.