Fund Portfolio Managers Research Articles

MUTUAL FUND PORTFOLIO ANALYSIS

Abstract — Mutual funds serve as popular investment vehicles due to their potential for diversification and professional management. However, choosing the right funds and optimizing one’s portfolio allocation can be complex. This project presents a comprehensive Mutual Fund Portfolio Analysis system designed to assist investors in making informed decisions. The system allows users to input their mutual fund holdings, tracking them over time to assess performance. It offers a range of analytical tools, including portfolio diversification analysis, risk assessment, and comparison against relevant benchmark indices. These features provide investors with a holistic view of their portfolio’s performance and risk profile. Moreover, the system employs advanced algorithms to generate personalized recommendations for optimizing the portfolio based on the user’s investment goals and risk tolerance. These recommendations aim to enhance returns while managing risk effectively. By utilizing this system, investors can gain deeper insights into their mutual fund investments, enabling them to make well-informed decisions. Ultimately, this project aims to empower investors to achieve their financial goals through strategic mutual fund portfolio management. Keywords – Mutual funds, Portfolio analysis, Investment decisions, Diversification, Risk assessment, Benchmark comparison, Portfolio optimization, Investment goals, Risk tolerance.

Managerial Multitasking in the Mutual Fund Industry

Managerial multitasking has become a common practice in the mutual fund industry. Although multitasking may have certain benefits for fund companies and portfolio managers, these arrangements have significant drawbacks for fund investors. We find that multitasking is associated with worse fund performance. Moreover, we find significant performance deterioration when a single-tasking manager switches to multitasking. We further demonstrate evidence that suggests that multitasking reduces the attention or limits the investment options a manager can allocate to their funds. Our study prescribes caution when assigning a portfolio manager a greater workload, as doing so adversely affects fund performance and, at some point, the ability of the fund family to attract capital.

Performance Comparison of Mutual Funds and Sharia Mutual Funds

Abstract Purpose: This study aimed to examine the differences in the performance of Islamic mutual funds with mutual funds based on the Sharpe and Jensen method for the 2010-2020 period in the Indonesian Capital Market. Research Methodology: The study uses a quantitative approach to the type of comparative research. The data used is secondary data from OJK. The population used in this study is the capitalization of sharia mutual fund performance data with mutual funds, the period 2010-2020 (monthly data) in the Indonesian Capital Market. Data analysis was carried out using the Sharpe and Jensen method and the Manova test with the help of the SPSS statistical program. Results: The results of this study indicate that there is no significant difference between the performance of Islamic mutual funds and mutual funds with the Sharpe and Jensen method. This shows that the return on the performance of Islamic mutual funds and mutual funds based on the Sharpe and Jensen method received will be relatively the same. Investment performance in Mutual Fund portfolio management is reflected in the net asset value (NAV). Limitations: This research has been attempted and carried out in accordance with scientific procedures. However, it still has limitations; this research is limited to 2010 – 2020 with monthly data. Contribution: This research implies that this research can better contribute to the general public, academics, and investors to understand the performance of capital market investment instruments before they invest.

Stock prediction and mutual fund portfolio management using curve fitting techniques.

Investment in the share market helps generate more profit than the other financial instruments but has the threat of market risk that might lead to a high loss. This risk factor refrains many potential investors from investing in the share market directly. Instead, they invest in different mutual funds that are being managed by experienced portfolio managers. To avoid the risk factors and increase the gain, they put the accumulated capital in multiple stocks. They need to perform many calculations and predictions to overcome the uncertainties and unpredictability and need to ensure higher gains to the investors of that mutual fund. In this research work initially, a data mining based approach employs a curve fitting/regression technique to forecast the individual stock price. Based on the above analysis, we propose a framework to diversify the investment of the capital fund. This method employs buy and hold strategy using both statistical features and basic domain knowledge of the share market. The proposed framework distributes the capital first, by distributing sector-wise, and then for each sector, investing company-wise, as a diversified approach among different stocks for higher return but maintaining lower risks. Experimental results show that the proposed framework performs well and generates a good yield compared to some benchmark and ranked mutual funds in the Indian stock market.

Passive Investing and Corporate Governance: A Law and Economics Analysis

An important debate in corporate governance is whether passive funds — a term that includes ETFs and index funds — have incentives to provide adequate oversight of their portfolio companies. One set of scholars contends that agency cost problems likely thwart passive fund stewardship for several reasons. First, passive funds suffer from an acute collective action problem because any investment in improving the performance of a company will benefit all funds that track the index equally, while only the activist fund will incur the costs. Indeed, these scholars point out that investments in stewardship are particularly costly for the passive fund portfolio manager, which lacks the firm-specific information necessary to participate in governance in a beneficial way. Second, passive fund portfolio managers may have inadequate incentives to invest in beneficial stewardship because they capture only a small fraction of the gains. And third and finally, passive fund portfolio managers have ample incentive to be excessively deferential to management, who are often their clients. These scholars conclude that because of these flawed incentives, the rise of passive investing portends economic harm and justifies wide-ranging regulatory intervention — from incentivizing passive fund stewardship, to restricting passive fund voting rights. Another set of scholars contend that passive fund stewardship is likely to be as good as, if not better than, stewardship by other investors. They contend that passive funds compete for investor dollars not just against other passive funds, but also against actively managed mutual funds. This competition provides an incentive for passive funds to invest in stewardship that will attract asset inflows. In addition, the large size of the institutional investors that offer passive funds affords them economies of scale and scope in stewardship. And because these large institutional investors have massive stakes in portfolio companies, capturing even a small fraction of any gain will substantially increase their take home pay, providing an incentive to be engaged for a small number of material votes that occur each year. These scholars contend — in the words of Adam Smith, and later, Jack Bogle — that the invisible hand is all that is needed. This is a chapter from the forthcoming Encyclopedia of Law and Economics (Adam Badawi, ed., 2nd edition 2020).

Window dressing in Brazilian investment funds

ABSTRACT This paper investigates the presence of window dressing in the Brazilian investment fund market, focusing on equity funds. Window dressing is a practice that presents a particular portfolio composition to the market, which is different from that held by the fund in the reporting period. Just before the end of the period, fund managers change their positions with the aim of presenting safer, more profitable securities portfolios. We believe that there is a lack of empirical evidence on this topic in Brazil. Previous research focuses on diversification, style analysis, fund portfolio turnover, manager profile, and performance. Therefore, we believe that our paper is pioneering in presenting results on window dressing in Brazil. With the presence of window dressing, the market may signal distorted results to investors and guide their allocations towards funds in which they would not invest in the absence of such practices. Moreover, the adoption of window dressing may increase transaction costs and thus destroy value. Our results present a connection with previous studies by Bremer and Kato (1996), O’Neal (2001), Ng and Wang (2004), Ortiz, Sarto, and Vicente (2012), and Agarwal, Gay, and Ling (2014). This paper provides evidence of window dressing in Brazilian equity funds and proposes an empirical study to verify the presence of the practice between 2010 and 2016, using market model residuals, rank gap, and backward holding return gap analysis techniques. In short, our results are consistent with window dressing practices in funds managed by small companies that were losers against the Bovespa Index and presented a high tracking error in the period.

A new dimension of investment forecasting: Evidence from Thailand

This study explores three major issues in mutual fund portfolio management in one of the emerging markets - Thailand. The first issue is to examine mutual fund managers' ability to time market coskewness by testing whether fund managers shift portfolio exposure when market coskewness changes which could be observed from changing in beta coefficient. The second issue is whether market coskeweness helps the mutual fund managers quest for alpha (superior) portfolio return. The third issue is to examine whether mutual funds managers' behaviours could be explained by the structure between bank and mutual fund relationship. Based on the analysis of 332 unique funds between January 2000 and November 2017, the results demonstrate that the good performing fund managers adjust their portfolio beta basing on changing in market coskewness. Outperform fund managers increase their portfolios' beta by 8.88% more than that of bottom performing fund managers. Besides, we find that both outperformed bank-related and non-bank-related mutual fund managers demonstrate an ability to time market coskewness. However, we find that non-bank-related mutual fund outperform bank-related mutual funds which support the conflict of interest hypothesis.

Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds

Just over 20 years have passed since the publication of Mark Carhart’s landmark 1997 study on mutual funds. Its conclusion—that the data did “not support the existence of skilled or informed mutual fund portfolio managers”—was the capstone of an academic literature, which began with Michael Jensen in 1968, that formed the conventional wisdom that active management does not create value for investors. We review the literature on active mutual fund management since the publication of Carhart’s work to assess the extent to which current research still supports the conventional wisdom. Our review of the most recent literature suggests that the conventional wisdom is too negative on the value of active management.

Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds

Just over 20 years have passed since the publication of Carhart’s landmark 1997 study on mutual funds. Its conclusion—that the data did “not support the existence of skilled or informed mutual fund portfolio managers”—was the capstone of an academic literature beginning with Jensen (1968) that formed the ‘conventional wisdom’ that active management does not create value for investors. In this paper, we review the literature on active mutual fund management since the publication of Carhart (1997) to assess the extent to which current research still supports the conventional wisdom. Our review of the most recent literature suggests that the conventional wisdom is too negative on the value of active management.

A Study on Factors Influencing Mutual Fund Portfolio Performance

Mutual fund portfolio managers do not always meet performance expectations, resulting in loss of capital reserves. Out of 3,612 U.S. based open-ended mutual funds, the risk-adjusted performance of 2,890 (80%) failed to meet the S&P 500 performance between the year 2006 to 2016. Grounded in Markowitz's modern portfolio theory, this correlational study examined the relationship between mutual fund class type, portfolio turnover, fund longevity, management turnover, and annual fund risk-adjusted performance. Archival data were collected from 88 U.S. based equity mutual funds companies. The results of the multiple regression analysis indicated the model as a whole was able to significantly predict annual fund risk-adjusted performance for the 5-year period ending 2016, F (4, 83) = 3.581, p = .010, R2 = .147. In the final model, mutual fund class type and portfolio turnover were statistically significant with mutual fund class type (ß= .249, t = 2.302, p = .024) accounting for a higher contribution to the model than portfolio turnover (ß = .238, t = 2.312, p = .023).

Genetic algorithm-based portfolio optimization with higher moments in global stock markets

Markowitz’s mean–variance portfolio model is widely used in the field of investment management. The changing dynamics of markets have resulted in higher uncertainties surrounding returns. Returns have often been found to be skewed and extreme events observed to be frequent. These characteristics are measured by skewness and kurtosis, which need to be accommodated in the definition of risk. They should also be included in the portfolio optimization process. The purpose of this paper is to investigate the impact of including higher moments in the estimation of risk in the process of international portfolio diversification. Our study is based on a sample of thirty-three globally traded stock market indexes, including emerging as well as developed markets, for the period between 2000 and 2012. Our inclusion of skewness and kurtosis makes portfolio optimization a nonlinear, nonconvex and multi-objective problem; this has been solved with the use of a genetic algorithm. Empirical results demonstrate that the higher moments model outperforms the traditional mean–variance model across the time period. The results of this study may be useful to fund managers, portfolio managers and investors, aiding them in understanding the behavior of the stock market and in selecting an optimal portfolio model among various alternative portfolio models.

Оценка эффективности компаний, управляющих пенсионными накоплениями, на основе метода DEA (Data Envelopment Analysis)

Цель исследования - рассмотреть непараметрический метод DEA и его практическое применение для оценки эффективности российских компаний, управляющих пенсионными накоплениями. В статье представлены теоретические аспекты пяти моделей DEA: модель с постоянной отдачей от масштаба (CRS); модель с убывающим, возрастающим и переменным эффектом от масштаба (DRS, IRS и VRS) и модель непроизводительного ресурсов (FDH). Проведен сравнительный анализ этих моделей на примере оценки эффективности 39 компаний, управляющих пенсионными накоплениями, за период с I квартала 2004 г. по I квартал 2016 г. Учитывая специфику деятельности управляющих компаний, для оценки их эффективности в настоящем исследовании выбраны показатели, связанные как с финансовой деятельностью компании, так и с управлением пенсионным портфелем. Поэтому в рассматриваемом случае модель будет иметь один вход - объем инвестирования за квартал и три выхода: стоимость чистых активов (СЧА), доходы от инвестирования за квартал и денежные средства на счетах в кредитных организациях. Сама по себе оценка эффективности компаний не всегда является целью, гораздо чаще исследователей интересуют внешние факторы, влияющие в целом на производительность компаний в отрасли. В роли критериев качества оценки эффективности в соответствии с различными моделями выбраны сочетание доходности и риска портфеля управляющей компании, стоимость ее чистых активов, а также индикаторы кризисного состояния экономики. Выбранные модификации DEA можно использовать в дальнейшем при принятии управленческих и инвестиционных решений.

Evaluating Hedge Fund Performance

A diverse set of measures allows investors to evaluate hedge fund portfolio managers’ performance across different dimensions. The various measures quantify the effectiveness of security selection, account for investor flows, operating risk, and worst-case investment scenarios, net out benchmark and peer-fund performance, and control for risk factors that are unique to hedge fund investment strategies. Hedge fund return information in published databases is usually self-reported, which is a conflict of interest that produces several reporting biases and inflated published average returns. After adjusting for these biases hedge fund average returns trail equity market returns and in fact almost exactly equal U.S. Treasury bill average returns between January 1994 and March 2016. Yet, after risk adjustment, the hedge fund performance picture brightens. In the aggregate, hedge funds have higher Sharpe ratios and multi-factor alphas, and lower maximum drawdown levels than equity market benchmarks.

Mutual Fund Portfolio Manager Structures: Attributes, Implications, and Performance

The purposes of this study are to review how mutual fund portfolio manager structures—and their attributes and implications—impact fund risk and return performance. For example, retail investors in actively managed mutual funds are often characterized as “dumb investors chasing past performance,” but evidence finds the opposite is true. Investors are able to identify skilled portfolio managers, but the average investor’s net alpha is significantly negative. There is thus no evidence that investors share in returns provided by manager skill. Again, why do investors who can identify skilled managers in actively managed funds continue to be satisfied with below-market returns? <b>TOPICS:</b>Mutual funds/passive investing/indexing, manager selection, performance measurement

Mutual Fund Portfolio Manager Arrangements and Performance

The purposes of this study are to review how mutual fund portfolio manager structures and their attributes, and implications impact fund risk and return performance. For example, retail Investors in actively managed mutual funds are often characterized as dumb investors chasing past performance, but evidence finds the opposite is true. Investors are able to identify skilled portfolio managers, but the average investor's net alpha is significantly negative. There is thus no evidence that investors share in returns provided by manager skills. Again, why do investors who can identify skilled managers in actively managed funds continue to be satisfied with below market returns?

Bayesian Nonparametric Measurement of Factor Betas and Clustering with Application to Hedge Fund Returns

We define a dynamic and self-adjusting mixture of Gaussian Graphical Models to cluster financial returns, and provide a new method for extraction of nonparametric estimates of dynamic alphas (excess return) and betas (to a choice set of explanatory factors) in a multivariate setting. This approach, as well as the outputs, has a dynamic, nonstationary and nonparametric form, which circumvents the problem of model risk and parametric assumptions that the Kalman filter and other widely used approaches rely on. The by-product of clusters, used for shrinkage and information borrowing, can be of use to determine relationships around specific events. This approach exhibits a smaller Root Mean Squared Error than traditionally used benchmarks in financial settings, which we illustrate through simulation. As an illustration, we use hedge fund index data, and find that our estimated alphas are, on average, 0.13% per month higher (1.6% per year) than alphas estimated through Ordinary Least Squares. The approach exhibits fast adaptation to abrupt changes in the parameters, as seen in our estimated alphas and betas, which exhibit high volatility, especially in periods which can be identified as times of stressful market events, a reflection of the dynamic positioning of hedge fund portfolio managers.

Are Bond Mutual Fund Flows Destabilizing? Examining the Evidence from the 'Taper Tantrum'

The notion that outflows from long-term mutual funds might destabilize financial markets is an old one, dating back to the late 1920s. The hypothesis, which has resurfaced periodically, has three components. First, because of an initial shock to financial markets, fund investors redeem heavily. Second, to meet redemptions, fund portfolio managers sell fund securities. Third, sales of fund securities put additional downward pressure on stock or bond prices. As this paper discusses, there has historically been little evidence supporting this hypothesis. Outflows from equity and bond funds have remained muted in the face of large economic shocks. Also, academic work has had difficulty finding evidence that outflows from funds add downward pressure to market prices. Since the financial crisis of 2007-2009, interest in the destabilizing-fund flows hypothesis has been renewed because of large inflows into bond funds, concerns that long-term interest rates could rise sharply as the Federal Reserve ends quantitative easing, and the development of theoretical models predicting that long-term fund flows could be destabilizing because of a “first-mover” advantage. This paper examines the evidence that outflows from bond fund flows could be destabilizing, focusing on the so-called “taper tantrum” period, the summer of 2013. Using descriptive analysis and vector autoregressions, we find there is at best very weak, if any, statistical evidence that bond fund flows have been destabilizing. Our findings are consistent with much of the literature, which has found that aggregate fund flows respond to market returns (often with a lag), but that there is not much evidence of a feedback effect from aggregate fund flows to market returns.

Portfolio Selection and Optimization with Higher Moments: Evidence from the Indian Stock Market

The Markowitz portfolio optimization model, popularly known as the Mean-Variance model, assumes that stockreturns follow normal distribution. But when stock returns do not follow normal distribution, this model wouldbe inadequate as it would prescribe sub-optimal portfolios. Stock market literature often deliberates that stock returns are non-normal. In such context the Markowitz model would not be sufficient to estimate the portfolio risks. The purpose of this paper is to expand the original Markowitz portfolio theory (mean-variance) via adding the higher order moments like skewness (third moment about the mean) and kurtosis (fourth moment about the mean) in the return characteristics. The research paper investigates the impact of including higher moments using multi-objective programming model for portfolio stock selection and optimization. The empirical results indicate that the inclusion of higher moments had a considerable impact in estimating the returns behavior of portfolios. The portfolios optimized using all the four moments, generated higher returns for the given level of risk in comparison to the returns of the Markowitz model during the study period 2000–2011. The results of this study would be immensely useful to fund managers, portfolio managers and investors as it would help them in understanding the Indian stock market behavior better and also in selecting alternative portfolio selection models.

Implementing Global Fund programs: a survey of opinions and experiences of the Principal Recipients across 69 countries

BackgroundPrincipal Recipients (PRs) receive money from the Global Fund to fight AIDS, Tuberculosis and Malaria (Global Fund) to manage and implement programs. However, little research has gone into understanding their opinions and experiences. This survey set out to describe these, thereby providing a baseline against which changes in PR opinions and experiences can be assessed as the recently introduced new funding model is rolled out.MethodologyAn internet based questionnaire was administered to 315 PRs. A total of 115 responded from 69 countries in Africa, Asia, Eastern Europe and Latin America. The study was conducted between September and December 2012.FindingsThree quarters of PRs thought the progress update and disbursement request (PU/DR) system was a useful method of reporting grant progress. However, most felt that the grant negotiation processes were complicated, and that the grant rating system did not reflect performance.While nearly all PRs were happy with the work being done by sub-Recipients (92%) and Fund Portfolio Managers (86%), fewer were happy with the Office of the Inspector General (OIG). Non-government PRs were generally less happy with the OIG’s work compared to government PRs.Most PRs thought the Global Fund’s Voluntary Pooled Procurement system made procurement easier. However, only 29% said the system should be made compulsory.When asked which aspects of the Global Fund’s operations needed improvement, most PRs said that the Fund should re-define and clarify the roles of different actors, minimize staff turnover at its Secretariat, and shorten the grant application and approval processes. All these are currently being addressed, either directly or indirectly, under a new funding model. Vigorous assessments should nonetheless follow the roll-out of the new model to ensure the areas that are most likely to affect PR performance realize sustained improvement.ConclusionsOpinions and experiences with the Global Fund were varied, with PRs having good communication with Fund Portfolio Managers and sub-Recipients, but being unhappy with the grant negotiation and grant rating systems. Recommendations included simplifying grant processes, finding performance assessment methods that look beyond numbers, and employing Local Fund Agents who understand public health aspects of programs.

Socially responsible funds and market crises

Compared to matched conventional mutual funds, socially responsible mutual funds outperform during periods of market crises. This dampening of downside risk comes at the cost of underperforming during non-crisis periods. Investors seeking downside protection would value the asymmetry of these returns. This asymmetric return pattern is driven by the mutual funds that focus on environmental, social, or governance (ESG) attributes and is especially pronounced in ESG funds that use positive screening techniques. Furthermore, the observed patterns are attributed to the funds’ socially responsible attributes and not the differences in fund portfolio management or the characteristics of the companies in fund portfolios.