Fund Management Companies Research Articles

The factors influencing the selection of fund management companies by Malaysian retail investors in the context of islamic unit trust funds

The purpose of this study is to analyze the impact of fund management companies' past performance, fees, perceived religiosity, and perceived risk on Malaysian Muslim investors' attitude toward them. The moderating effects of investor risk aversion, price sensitivity, religiosity, and Islamic financial literacy are considered. A model based on the unified theory of acceptance and use of technology is built to analyze the impact of the variables considered. The study data were collected using a survey of 550 Malaysian retail investors. Our findings show that Muslim investor attitudes are negatively affected by the perceived risk of a fund management company and positively affected by a fund management company's perceived religiosity and past performance. Moreover, the perceived religiosity impact is positively moderated by an investor's Islamic financial literacy and negatively moderated by the investor's price sensitivity. Practical implications of the results and avenues for further investigation in future research are discussed.

The role of ESG scores in ESG fund performance and institutional investor selection

This paper conducts a study on ESG funds between 2012 and 2022 to analyze the impact of ESG fund performance indicators on their institutional ownership ratios. The findings show that the performance of ESG funds is positively correlated with the proportion of institutional holdings. External institutional investors tend to be more inclined to hold funds with excellent historical performance, while fund management companies are more inclined to hold funds with poorer historical performance. In addition, fund management companies are more inclined to hold funds with high ESG scores.

Analysis of Financial Performance of Islamic Mutual Funds & Islamic Pension Funds in Pakistan

The Islamic finance industry is growing exponentially at global level catering to the demands of Muslim consumers. The same trend is being observed in Pakistan as many Islamic mutual funds and Islamic pension funds are working alongside traditional funds. This research seeks to explore the financial performance of various Islamic mutual funds and Islamic pension funds in Pakistan from 2015-2022. For this purpose, we selected 10 Islamic mutual funds and 5 Islamic pension funds on random basis and employed Sharpe Ratio, Treynor Ratio, and Jenson’s Alpha techniques to analyze the financial performance of these funds in terms of returns generated and their comparison with the industry results. The study's findings showed that Islamic mutual and pension funds in Pakistan are still struggling to provide market-oriented returns to their investors. This gap in generating excess returns may be due to the nature of the Islamic funds that restricts their investment options for diversification due to the Shariah guidance. This study recommends that industry stakeholders including fund management companies, investors, regulatory bodies, Shariah scholars etc. all need to work closely to address the short-comings of the existing operational restrictions of the Islamic funds and ensure a level-playing field along with the traditional fund management companies for generating maximum returns for their investors.

Integration of Advanced Sri Practices Into the European Asset Management Industry: A Survey of Drivers

Sustainable and responsible investment (SRI) has experienced impressive growth in the last two decades. However, the adoption of advanced SRI strategies that go beyond the mere exclusion of companies or asset classes has not kept pace with this expansion, a critical development regarding its potential impact on sustainability. For this reason, this study aims to identify the main drivers for the adoption of advanced sustainable and responsible investment practices by asset management companies to know why and which companies better advance the strengthening of SRI in the European financial market considering an original combination of different SRI drivers. To investigate which factors seem to be more decisive in adopting more sophisticated SRI practices, we first conducted a survey among fund management companies that manage and/or distribute investment funds in Europe. Second, we used logistic and multivariate regressions as analytical tools for testing the hypotheses. Results show that societal pressures and a formal corporate social responsibility policy are the main drivers for adopting advanced SRI practices by asset management companies.

Fund Management Company Governance and Strategic Cross-Fund Subsidization

Fund Management Company Governance and Strategic Cross-Fund Subsidization

External complexity and the design of management control systems: a case study

Increasing complexity and dynamism in technologies and markets are putting new demands on management control systems beyond those that these systems traditionally address. This longitudinal case study traces the experience of a real estate fund management company in addressing the need to make sense of increasing external complexity and its effort to design a management control system to support top management in this task. Our findings indicate that internally-focused systems used interactively fail to fulfill this role because of their paucity in terms of information on external complexity. As a result, the company experimented with various designs and developed a management control system that relied on information external to the organization and mostly qualitative. This system became the infrastructure for continual discussions on strategic but also tactical implications of external events. The system that the company developed relied on the wisdom of crowds, structured meetings, and information technology to gather and process qualitative information to enhance peripheral vision. Overall, the case study illustrates the challenges and potential responses to the design of management control systems for the strategic surveillance of external complexity.

Political connections, corruption, and investment decisions of Chinese mutual funds

We examine the impact of political connections on the investment decisions of Chinese mutual funds. We identify a direct link between mutual funds' political connections and stocks held from the same political network using hand-collected information on the professional backgrounds of Chinese mutual fund managers and fund management company (FMC) shareholders. While mutual funds tend to allocate more investments to stocks based on their political connections, this effect alleviates somewhat after the 2012 anti-corruption campaign. Our findings suggest that anti-corruption campaigns can help reduce the political effects of government-related agencies on fund holdings and contribute to better market fairness.

Political connections of Chinese fund management companies and fund performance

AbstractThis study uses hand‐collected information on shareholders’ backgrounds of mutual funds and their fund management companies (FMCs), and administrative and criminal penalties for insider trading as the proxy of government regulation intensity. We fill a gap in the literature by identifying a positive relationship between funds’ performance and the proportion of state‐owned FMC ownership that becomes negative when the Chinese government increased its regulatory effort to reduce informational advantages from political connections obtained through this ownership channel. Results are robust using DiD and IV analyses, placebo tests, propensity score matching, Oster test for missing covariates, channel tests, and alternate ownership classifications.

Insights from fund management companies in Vietnam: Evidence from financial reports

This paper provides new evidence on fund industry in Vietnam, specifically the profitability and firm characteristics of a company which manages funds. Using hand-collected company information for fund management companies (FMCs), the study shows that FMCs generated a high growth in profitability and revenue from 2014 to 2020. The paper also contributes to the fund management literature by explaining cross-sectional variation in profitability. The research finds that size is the key determinant of FMCs’ profitability, where larger FMCs generate significantly higher profitability. In addition, Vietnamese FMCs have a very high liquidity ratio, a low proportion of fixed assets and a small debt ratio.

Stop-loss early termination clause and hedge fund performance

This paper is the first to empirically examine the incidence, determinants, and consequences of the stop-loss early termination clauses (SLCs) in the hedge fund industry. The SLCs force hedge funds to be terminated when their cumulative losses breach certain thresholds. We find 14% of hedge funds in China have SLCs. Fund management companies with higher previous performance and risks are more likely to establish funds with SLCs. And funds with SLCs generate higher future performance. Further, funds become more risk-averse when they approach to the termination thresholds, especially for large funds. We attribute the better performance of funds with SLCs to prompt terminations of bad performing funds.

The impact of opportunity factors on fraudulent behavior in the Vietnamese stock market

This study examines the opportunity factors on fraudulent behavior in Vietnam’s stock market by employing mixed methodology. In this regard, data were obtained from 20 in-depth interviews and 568 questionnaire survey responses of securities companies, fund management companies, stock exchanges and the State Securities Commission in Vietnam. Using the exploratory factor analysis, the study discovered that the following groups of opportunity factors result in fraudulent behavior: (i) influences of the internal person and issuer, which include (person whose internal information has not been published by the company), collusion of the issuer and securities company, abuse of power by influential person in the company, complex organizational structure of the issuer (one person handling multiple positions) and failure of an issuer to properly control internal information; (ii) investors’ factors, which include investors’ trade of securities based on the insider’s suggestion, framework of foreign investors, brokerage company recommendations, and advisory information on securities forums; and (iii) factors associated with market management and supervision, such as use of lenient penalty with no deterrent effect, untimely market management and limited authority of the securities committee. Using regression analysis, the order of the impact of each group of factors was found as follows: factors due to internal person and the issuing organization, the market management and supervision, and investors.

ATTRIBUTES AND PERFORMANCE OF FUND MANAGEMENT COMPANIES: EVIDENCE FROM THE LARGEST SHARIAH-COMPLIANT FUND MARKETS

Background and Purpose: The study examines the effect of fund management companies’ (FMCs) attributes on FMC performance in the four countries with the largest number of Islamic funds from 2007 to 2018.
 
 Methodology: The study uses pooled regression analysis on 70 FMCs, comprising Saudi Arabia (25), Malaysia (20), Indonesia (14) and Pakistan (11). The sample is further divided into FMC with Islamic funds focused (IFFMC) and conventional funds focused (CFFMC).
 
 Findings: Only past flows are insignificantly related to performance. Both proxies for size positively relate to returns, but only in the case of Saudi Arabia. In Pakistan, performance improves with assets under management (AUM), while in Malaysia and Indonesia, an increasing number of funds negatively relate to performance. A relatively high number of better performing funds positively affect FMC and vice versa. Additionally, there are significant differences in the factors determining IFFMC and CFFMC performance, with the number of funds and AUM positively affecting the performance of IFFMC but not CFFMC. Poorly performing funds adversely affect CFFMC but not IFFMC.
 
 Contributions: This study provides useful information for investors using a top-down approach to FMC then fund selection, and for managers in evaluating the impact of factors like FMC scale and scope on performance. The impact of these attributes differs between CFFMCs and IFFMCs which lies in the performance differences commonly observed, at the FMC and fund level.
 
 Keywords: Islamic funds management industries, Islamic mutual fund, fund performance, Islamic finance.
 
 Cite as: Marzuki, A., Bani Atta, A. A., & Worthington, A. (2022). Attributes and performance of fund management companies: Evidence from the largest Shariah-compliant fund markets. Journal of Nusantara Studies, 7(1), 114-141. http://dx.doi.org/10.24200/jonus.vol7iss1pp114-141

Legislativni režim kontrolne funkcije Narodne banke Srbije nad poslovnim bankama

The existence of a central bank in one country is of a great importance, because the central bank controls the functioning of the financial market and its participants (banks, insurance companies, financial leasing companies, payment institutions, voluntary pension fund management companies and exchange offices), striving to comply with the law on the National Bank of Serbia in achieving the goals that are clearly and precisely defined. It achieves its goals by performing the intended functions. One of the functions performed by the NBS is reflected in the control of banks, which is the topic of this paper. The control function of the NBS is defined by both the Law on the National Bank of Serbia and the Law on Banks. The NBS performs the function of controlling banks in the process of establishing a bank, but also in the course of its operations. The process of establishing a bank, as the most important financial institution, is far more complex. The complexity of this procedure is reflected in the fact that the legislator has forseen the procedure of obtaining preliminary approval and then obtaining a work permit. After holding the founding assembly of the bank and obtaining the obligatory consent, the bank can be registered. The control function is also represented in the fact that the bank has the obligation to submit regular and extraordinary reports to the National Bank. In this way, the NBS protects the financial market of Republic of Serbia from instability and crises that can cause illiquid, uncertain and illegal operations of banks.

Analysis on Factors Affecting Performance of Indexing Investment

This article analyzes the current status of indexing investment performance in China and the characteristics of fund managers and fund management companies. It also theoretically analyzes the influence of these factors on indexing investment performance in terms of fund governance structure, characteristics of fund managers and fund companies, stock selection ability and timing ability. Next, it uses multiple regression analysis from three dimensions mentioned above to verify the influencing factors on investment performance. The results show that in terms of passive investment, fund tracking error is significantly negatively correlated with institutional holdings and fund managers’ stock selection ability, and significantly positively correlated with fund managers’ timing ability. Female fund managers’ tracking errors are smaller. Institutional investors play a positive role in promoting the performance of active investment. The fund manager’s stock selection ability can effectively reduce the fund’s sensitivity to target index fluctuations, and the fund manager’s timing ability can significantly improve the performance of fund allocation. Funds allocated by female fund managers will be less sensitive to target index fluctuations. Keywords: indexing investment, performance, fund management, fund managers DOI: 10.7176/RJFA/12-22-01 Publication date: November 30th 2021

Does Fund Managers's Human Capital Add Value for The Fund Performance in Malaysia

This study examines the integration of fund managers' human capital characteristics (including education, gender, race, experience, age, team manager) relative to the fund performance model. A few previous empirical studies paid attention to human capital characteristics and mutual fund performances based on developed markets and have obtained mixed result findings. However, very little attention has focused on fund managers' human capital characteristics in the Malaysian mutual funds industry. Hence, this study attempts to fill this research gap.Based on a sample of Malaysian mutual fund managers, data is sourced from fund management companies, Thomson One database and fund master prospectus, from January 2012 to December 2014. The study employing ordinary least squares (OLS) and three-stage least squares (3SLS) methods to integrate fund performances and human capital characteristics with single and simultaneous equations based on asset pricing models. Keywords: Human capital, fund manager, fund performance.

Can Personality Traits, Risk Attitude, and Demographics Explain Fund Managers’ Disposition Effect?

This paper focuses on the extent to which personality traits, risk attitude, and demographics explain holding losses and cutting gains using survey data collected among equity and bond fund managers. For this purpose, cross-sectional multiple regressions were conducted. This paper argues that holding losses and cutting gains are two independent biases, rather than two sides of the disposition effect. The results show a significant effect of extraversion, openness, risk-taking, professional experience, and university degree on holding losses, and a significant effect of risk perception and gender on cutting gains. This paper contributes to few studies on personality traits and behavioral biases of professional investors, and it may have important practical implications in fund management companies.

The Effectiveness of Anti-Money Laundering / Counter Financing of Terrorism Requirements in Fund Management Companies

Anti-Money Laundering / Counter Financing of Terrorism (AML/CFT) broadly encompasses regulatory requirements, acts and guidelines designed to curtail the practice of generating funds through unlawful or criminal activities. Several infringement notices were issued to market intermediaries due to provision breaches of the guidelines. Although policies and procedures have been tightened up to the level of satisfaction, assessing the effectiveness of AML/CFT legislation is still necessary. The main aim of the study is to examine the independent variables, namely competency level of compliance team members, regulatory compliance and quality of AML/CFT framework that influence the effectiveness of AML/CFTrequirements of the compliance officers that are working in FMCs in Malaysia. The Expectancy Theory has been applied to form the framework and to develop the hypotheses. Three hypotheses were developed and tested using the data from 70 samples of FMC's in Malaysia. The result of the study showed that there were significant relationships between the factors analysed in this study. This study will help the financial institutions especially the Fund Management Companies (FMCs) in understanding the factors that influence the effectiveness of AML/CFT requirements and taking necessary action to enhance their internal AML/CFT process and its compliance with the regulations. This would help the FMCs to have effective control of AML/CFT during the on-boarding and ongoing monitoring process.

Friend or foe: On a common shareholder relationship between mutual funds and public companies

We examine a novel business tie between mutual funds and public firms in China via a common shareholder (CS) relationship, in which a fund management company (FMC)'s shareholder also has a substantial stake in a public company invested by this FMC. The CS relationship may give connected funds an information advantage about the company over non-related funds. Meanwhile, mutual funds may engage in investment activities that help support stock prices of its CS-connected companies. Empirical evidence supports the superior information hypothesis but not the price support hypothesis. The holdings of CS-connected FMCs significantly predict subsequent stock returns. Moreover, such superior information is related to company fundamentals rather than short-term corporate events.

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 Emerging Asia Pacific Capital Markets: Cambodia

The Cambodian capital markets have come a long way considering that the Paris Peace Agreements, which ended the nation’s civil war, were signed only in 1991. Strong GDP growth (10.8% annually between 2000 and 2018), a dollarized economy with free movement of capital, and a policy consensus favoring investments should have spurred the rapid development of a securities exchange in Cambodia. The first equity listing on the Cambodian Stock Exchange (CSX), however, did not take place until 2012. Currently in Cambodia, seven companies are listed on the main board, and another six companies have issued eight bonds. The CSX is still small in size compared with its Asian neighbors’ bourses. Its development is also behind schedule given the urgent need of local corporations to find cheap and convenient sources of funding. Stocks and bonds on the CSX have had comparatively low returns historically when compared with less risky bank deposits or higher returns from real estate. Mindful of these challenges, the Royal Government of Cambodia has implemented a broad range of measures to support faster capital market development. Educating both investors and corporations, introducing accounting standards and audit requirements, and licensing such market actors as fund management companies, securities brokers, and custodian banks, to name a few, will provide the infrastructure and support Cambodia needs for long-term growth. Listing private companies with exciting growth prospects will be key in renewing interest among potential investors in Cambodia. Likewise, new investment choices such as REITs, private equity, and mutual funds should spur further interest. The creation of a government bond market will be critical as well in order to attract institutions that crave safe and long-dated assets for asset–liability management purposes. All of these factors combine for a constructive view of the prospects for Cambodian capital markets.