Fund Portfolio Research Articles

The Impact of Mutual Fund Performance Management on Good Corporate Governance Banking

Management of mutual funds Portfolios by investment managers and bank as dealers of mutual funds portfolios, good corporate governance banking be able to support cooperation with mutual funds companies who manages mutual funds portfolio. This explanatory methodology research is used in several phases technique analysis that is forming equation function of mutual funds performance portfolio with indicated net assets value of every mutual funds portfolio and equation function of good corporate governance with indicated the composite Good Corporate Governance aspects. This research found that balanced mutual portfolios and fixed income mutual portfolios able to explain Good Corporate Governance model by the positive influence means that performance management can optimize of return efforts if the banking composite Good Corporate Governance value predicated very good. The excellent Good corporate governance banking capable of being described by equity mutual funds portfolios and money market mutual funds portfolios by negative influence means performance management of equity mutual funds portfolios and money market mutual funds portfolios not efforts to getting optimize return achievement.

Partnership Allocations and Their Effects on Tax-Aware Fund Investors

Limited partnerships are attractive investment vehicles for investors because, as limited partners, investors cannot lose more than their invested capital despite the leverage of the partnership’s portfolio. Consistent with this, the availability of tax losses to a limited partner is also more limited as compared to a separate account investor. Understanding this limitation is particularly important for investors in tax-aware funds which tend to allocate net tax losses. In addition, investors in funds structured as limited partnerships are affected by laws and regulations governing partnership allocations of gains and losses realized by the fund portfolio. This study outlines certain relevant principles of “securities partnership” accounting and shows how these principles apply to investing in tax-aware funds structured as limited partnerships. We argue that the laws and practices of partnership accounting can align tax results with the economic outcomes of the investors and ensure that new investors do not materially suffer from unrealized gains accumulated in a tax-aware fund. Our conclusions are illustrated with a simple stylized model.

Returning to the Silk Road: Should Global Portfolios Replace BRICS?

The Silk Road has valid historical significance between nations that have conducted trade for centuries. In recent socioeconomic trends, the re-emergence of the New Silk Road is outlined with perceived implications for investment strategies. Investment portfolios of exchange-traded funds (ETFs) resembling the Silk Road nations are constructed to analyze performance and diversification benefits and are benchmarked against the Brazil, Russia, India, China, and South Africa (BRICS) ETF. The results reveal mixed performance: lower correlations with developed markets and an increase in capital inflows, as reflected in ETF subscriptions. Causality testing with developed markets shows a bidirectional causation. Unidirectional causation is also found, running from the Silk Road basket to both BRICS and the MSCI Emerging Market ETF. Moreover, using a hedging approach to investigate effective diversification in a global portfolio, evidence is found of effective international diversification when adding the basket of Silk Road markets. This article puts forward the argument that investors should consider an alternative to BRICS and divert investment attention toward cohesive, frontier economic blocs.

Price and market risk reduction for bond portfolio selection in BRICS markets

This paper focuses on classical portfolio strategies applied to five countries, which are Brazil, Russia, India, China and South Africa. These five countries form the so-called BRICS group. In particular, the authors investigate their corporate and sovereign bond market and evaluate whether these markets can represent a profitable investment for non-satiable and risk-averse investors. Two-step optimization is proposed to control price risk and market risk. For price risk management, classical immunization strategies and are obtained funds of bond are obtained that share the same risk measure. For market risk control, the previously found funds are used and a performance measure optimization commonly used in stock markets is applied to define the best portfolio of funds. Therefore, the resulting optimal portfolio controls the price risk and jointly maximizes a desired performance measure that includes the market risk. Finally, the authors propose an empirical analysis to evaluate the profitability of the suggested two-step optimization for the five BRICS countries and compare the ex-post sample paths of the obtained portfolios for testing the stochastic dominance relations.

Correlated Flows, Portfolio Similarity and Mutual Fund Liquidity Management

We contend that the confluence of portfolio similarity and correlated liquidity shocks within mutual fund styles can exacerbate fund exposure to liquidity risk. We find that mutual funds mitigate such liquidity risk exposure by systematically reducing portfolio overlap with peer funds when their flows become more correlated (Overlap Management). Overlap Management is highly persistent and is more pronounced among funds with liquidity concerns. Funds engaging in overlap management tend to avoid stocks that are more vulnerable to flow-driven trading when facing correlated flows. As a result, this type of liquidity management independently contributes to higher fund performance after controlling for the direct relation between portfolio overlap and fund performance. The benefit of Overlap Management is therefore distinct from that of strategy uniqueness as studied in prior literature. An examination of the channel through which Overlap Management contributes to fund performance suggests that overlap management effectively alleviates the negative feedback effect of outflows on future performance.

Mutual fund performance attribution and market timing using portfolio holdings

We propose a novel performance attribution model for equity fund portfolios. The model analyses investment decisions based on portfolio holdings and measures the value added from different sources of performance such as past return strategies, security selection, market timing and passive timing. The model was tested for a sample of mutual funds. Empirical results show that security selection is the main contributor to fund performance regardless of the sample period considered or the asset pricing model used. The evidence of timing ability is mixed with low significance. Nevertheless there are noticeable differences between the timing ability of the best and worst performing funds, especially in crisis periods. Analysing the relationship between mutual fund performance (and its different components) and fund characteristics, we find that top funds are significantly smaller and more concentrated than other funds. Finally, we also examine the persistence in the performance and in its components finding evidence of positive persistence in past return strategies and picking skills although this persistence is not shown in the overall performance.

Volatility-Managed Portfolios of Mutual Funds

Performance evaluation of mutual funds using factor pricing models is usually distorted by the existence of a volatility anomaly and correlated residuals. By augmenting the Fama-French five-factor model with an active peer benchmark, we eliminate the measurement errors caused by these distortions. We find that the APB-augmented five-factor model can select mutual fund portfolios with superior out of sample alphas. However, the excess portfolio returns are volatile and subject to crash risk. A risk management strategy which uses the past volatility of the mutual fund portfolio returns to scale the investment positions can help reduce the volatility of the portfolio returns and avoid extreme losses. Previous studies on stock and currency portfolios find that such a risk management technique also increases the Sharpe ratio of the portfolios. However, we find that the net impact of the risk management on the Sharpe ratio of mutual fund portfolios depends on the investment style of the mutual funds in the fund portfolios. Similar to the stock and currency portfolios, the Sharpe ratios of the mutual fund portfolios can be increased by the risk management if the portfolios are formed in mutual funds which specialize in large cap stocks. By contrast, risk management reduces the Sharpe ratios of portfolios which include small stocks-focused funds. The reason is that the mutual funds which specialize in small stocks relies more on their abilities to take on more factor risks when the factor returns are high to generate returns. Volatility timing reduces the premium of those funds’ market timing skills. Compared to investors in mutual funds which specialize in value stocks, investors in growth stocks-focused mutual funds can better enhance their market timing skills by the risk management technique. More specifically, after volatility timing, the growth stocks-focused mutual fund investors are able to take on more factor risks when the factor returns are high and gain higher average returns.

Risk and Return Analysis of Closed-End Mutual Fund in Bangladesh

This study attempts to conduct a five-year performance assessment by analyzing all 24 closed-end mutual funds that had been trading at Dhaka Stock Exchange from December 2011 to January 2017. While analyzing the risk-return profile, the research incorporated both market price and net asset value (NAV) of the mutual funds.NAV depends on the price of securities included in a fund's portfolio whereas, the market price is determined by demand and supply forces. Thus, the market price of a fund is not always equal to its NAV. The study uses market price as a basis for analyzing the risk-return profile of the funds for evaluating the performance of the funds in the market. With the purpose of assessing the performance of asset managers, the study uses NAV as a basis for computing Jensen's α and M squared measure. While assessing performance the study focuses on Jensen’s α and M squared measure as other measures like Sharpe and Treynor do not work with negative numerators and do not provide information on whether the mutual fund outperformed the market portfolio. Both Jensen’s α and M squared measure can independently describe whether a fund beat the market or not. A positive value of Jensen’s α and M squared measure indicates that the fund outperformed the market considering respectively β and σ as a measure of risk. SEBL1STMF, POPULAR1MF, and IFILISLMF1 were among top four funds considering both M2 and Jensen’s alpha measures based on both market price and NAV. The M2 measure, a coefficient of variation, Sharpe ratio, and Treynor ranked SEBL1STMF as the best performer in the market. This fund also topped while assessing performance by M2 measure on the basis of NAV. On the basis of market price and NAV, 21 funds and 22 funds could produce positive M2 respectively. In the year 2012, 2013 and 2014 mutual funds provided negative annualized return on an average (On the basis of market price). The average annualized return rebounded on 2015 and further increased on 2016. All mutual funds provided a positive return in 2016. A different picture was found while calculating annualized return on the basis of NAV, asset managers could generate positive annualized returns on an average in 2013, 2014, 2015 and 2016.

Better to Stay Apart: Asset Commonality, Bipartite Network Centrality, and Investment Strategies

By exploiting a bipartite network representation of the relationships between mutual funds and portfolio holdings, we propose an indicator that we derive from the analysis of the network, labelled the Average Commonality Coefficient (ACC), which measures how frequently the assets in the fund portfolio are present in the portfolios of the other funds of the market. This indicator reflects the investment behavior of funds' managers as a function of the popularity of the assets they held. We show that ACC provides useful information to discriminate between funds investing in niche markets and those investing in more popular assets. More importantly, we find that ACC is able to provide indication on the performance of the funds. In particular, we find that funds investing in less popular assets generally outperform those investing in more popular financial instruments, even when correcting for standard factors. Moreover, funds with a low ACC have been less affected by the 2007-08 global financial crisis, likely because less exposed to fire sales spillovers.

Short-termism of long-term investors? The investment behaviour of Dutch insurance companies and pension funds

ABSTRACTCountercyclical investment strategies of large institutional investors such as insurance companies and pension funds can support financial stability, while procyclical investment behaviour is considered as destabilizing at a macro level. Yet, there is limited understanding of how insurance companies and pension funds invest during market shocks, such as the global financial crisis. Investigating the equity and fixed income portfolios of Dutch non-life insurers, life insurers and pension funds, we find evidence for procyclical behaviour by insurance companies (both life and non-life). For pension funds, we find evidence for countercyclical behaviour during market upturns.

Performance evaluation of Portuguese mutual fund portfolios using the value-based DEA method

The increased volatility in capital markets since the outbreak of the 2008 global financial crisis and the investor’s lack of confidence in the banking sector represented significant challenges to portfolio fund managers. The current study assesses the performance of Portuguese mutual fund portfolios considering the period 2007–2014 using the value-based DEA method. This approach combines data envelopment analysis (DEA) with multiple criteria decision aiding. A dynamic evaluation including value judgements is carried out using data from 15 Portuguese equity funds. The results unveil the impact of the global crisis in the Portuguese investment funds industry. They show that Portuguese investment funds performed better between 2011 and 2013; this suggests that equity funds investors became more confident in these vehicles due to political measures reinforcing financial markets. The methodology followed in this study contributes to help investors in the identification of the funds with the best practices according to their judgments.

KAJIAN PENGELOLAAN DANA KOPERASI SIMPAN PINJAM KONVENSIONAL DI KOTA SEMARANG

<p><em>In accordance with the principles of cooperatives, Credit Union known as financial institution, as well as serve as an intermediary institution. Credit Unions activities include collecting deposits from members, gives loans to members, other cooperatives and or their members, as well as manage the balance of funding and lending.</em></p><p><em>Based on the study results, it is found that Credit Unions can not rely on collection of funds from the member either in the form of savings, compulsory savings, time deposits. In addition, Credit Unions are also less interested in establishing a partnership with the Bank either through the linkage program and other programs.</em></p><p><em>In an effort to balance of fund and loan portfolio, the manager of more use their experiences in the past, so that utilization is less than optimal. Weak regulation, has made the behavior of the manager of Credit Unions to act like a bank.</em></p><p> </p>

Appraisal Ratio and the Mutual Fund's Stock Picking Skill

According to the costly arbitrage theory, stocks with high idiosyncratic volatility deter arbitrageurs from trading against the temporal mispricing to gain profits. Hence, long equity holders, such as equity mutual funds, would not take on too much 'idiosyncratic risk' in their portfolios, unless they have strong beliefs that those assets are undervalued. In this study, we use the holding-based fund-level 'appraisal ratio', based on the Treynor and Black (1973) model, to infer the stock picking skill of actively managed mutual funds in the U.S. equity market. Overall, we find that the degree of a fund portfolio tilting towards stocks with higher 'appraisal ratio' helps to identify those funds with superior stock picking ability, which leads to better future performance. And the effect is stronger following periods with lower investor sentiment, indicating that this approach can identify those skilled fund managers who are active in terms of searching for undervalued stocks. Evidences from quarterly earnings announcements and analyst recommendations complement our conjecture that this measure is a good proxy for the stock picking ability of skilled fund managers in the U.S. active management industry.

Does MAX Matter for Mutual Funds?

We examine the lottery characteristics of mutual funds. We proxy for lottery characteristics using past extreme daily returns within a month, or MAX. We find that high MAX funds underperform both in portfolio sorts and cross-sectional regression tests. This result suggests that the MAX effect documented for individual stocks is also present within diversified portfolios of mutual funds. Using mutual fund flows, we also show direct evidence of strong retail, but not institutional, investor demand for high MAX funds. Overall, our findings indicate that retail investors exhibit demand for lottery-like funds that are likely to suffer from future underperformance.

Stress test of banks in India across ownerships: a VAR approach

PurposeThis paper aims to examine whether the Indian banking system is robust to withstand unexpected shocks from external and domestic macroeconomic factors after financial liberalization in 1992. As proposed by Demirgüç-Kunt and Detragiache (1998) and Kaminsky and Reinhart (1999) banking crisis follows financial liberalization. India embarked financial deregulation from 1992, whereas the ongoing global financial crisis (GFC) could jeopardize bank portfolios.Design/methodology/approachStress test is undertaken through the vector auto regressive (VAR) model to examine if decline in GDP, exchange rate volatility and foreign capital portfolio funds adversely impact bank asset quality through higher defaults. The VAR model is run for banks belonging to public, private or foreign ownership. Soundness of banks is measured by the non-performing assets (NPAs) with quarterly data from 1997 to 2014. Post-VAR estimation technique, Granger causality test (GC) and impulse response function (IRF) are used to check for robustness of the VAR model findings.FindingsThe authors found that there is little divergence among banks of different ownership in responding to the shocks from REER, foreign capital flows and GDP output gap. IRF shows that GDP shock to NPA of public and private banks takes more than nine and eight quarters to stabilize. Foreign banks are impacted by the same macroeconomic factors. The stress test exhibits that public banks are more vulnerable and need recapitalization. Moreover, domestic banks are not adversely affected by the GFC, and credit for this could be attributed to the Reserve Bank of India’s (RBI’s) regulatory policy.Research limitations/implicationsSurprisingly, capital market indices do not influence banks’ NPA, and this needs further investigation. The limitation arises from the fact that stock market index for banks was launched only in the early 2000. Missing data and limited number of banks shares traded in the market could explain the trivial results.Practical implicationsFindings of this study will be useful to RBI policymakers and bank managers. The exchange-rate risk faced by borrowers that lead to increased NPAs is an issue that the RBI would be interested to examine. The impact of foreign capital flows, adversely influencing the NPAs of banks, is a significant issue that the RBI is concerned with.Social implicationsBanking sector crisis has serious repercussions, causing loss of household savings and decline in confidence in the banking sector.Originality/valueThis topic was explored in India only by Bhattacharya and Roy in (2008). No other similar work has been done to the authors’ knowledge in stress test of banks in India across different ownership. The authors’ study period covers the GFC and shows that it has not caused devastation as it has in developed countries.

Impact of Credit Risk Transfer Techniques on Lending Behavior of Conventional & Islamic Banks in Pakistan

Application of risk management techniques gain significant importance after the financial crises of 2008. Banks adopt contemporary risk management techniques to eliminate credit risk associated with the enlargement of their lending volume. The present study aims to analyze the impact of credit derivatives on lending/financing behavior of conventional and Islamic banks of Pakistan. The study used comparative analysis by employing random effect model for the sample of 20 conventional banks and pooled OLS regression on sample size of 5 Islamic banks for the period of 2006-2016. Results of the study show that conventional banks effectively increase their lending volumes by utilizing risk transfer techniques. However, Islamic banks are still at its infancy in utilizing risk transfer techniques due to shariah restrictions. The study recommends policy implications for Islamic bank to introduce innovative shariah compliant hedging instruments to boost their financing portfolios.

Towards a Goal Programming Methodology for Constructing Equity Mutual Fund Portfolios

The evaluation of the performance of mutual fund [MF] portfolios has been a very interesting research topic not only for researchers, but also for managers of financial, banking and investment institutions. In this paper, a multicriteria decision aid framework is proposed for the construction of MF portfolios. The proposed methodology is based on a Goal Programming approach to determine the proportion of each MF in the constructed portfolios. This methodology is applied on a sample of Indian MFs over the period 2007-2006 with encouraging results.

Zarządzanie relacjami z klientem w spółkach portfelowych funduszu inwestycyjnego

Customer relationship management in investment fund portfolio companiesThe purpose of this paper is to present the problems related to customer relationship management in relation to the changes taking place in contemporary economic space. Thus, the analysis is based on the definition of activities undertaken in business strategies, with particular emphasis on the forms of communication aimed at activating buyers. In addition, the development of specific customer relationships that are the basis for the optimization of defined business processes in connection with the requirement for effective cost management within the scope of operating operations, has been highlihgted. That is compatible with the current market trend, which emphasizes the importance of acquiring, processing and updating information about buyer behavior and preferences. Therefore, having knowledge of the customer and managing it, nowadays determines the competitive advantage of the organization.

Fund Portfolio Holdings and Affiliated Analyst's Objectivity: Do Equity and Employment Relationship Matter?

ABSTRACTThe author investigates how the equity relationship between fund company and brokerage firm as well as employment relationship between analyst and brokerage firm affect affiliated fund stock portfolio holding and the affiliated analyst's objectivity. By using the specific data of such equity and employment relationship, the author finds that equity and employment relationship do matter in fund portfolio holdings and analyst objectivity. Specifically, analysts tend to release more optimal ratings on stocks that have been hold by the funds, and the funds tend to significantly reduce the stocks in their portfolio once the analysts have announced high ratings on the stocks. Moreover, the analysts in employment relationships with majority shareholders of funds and with a low reputation reveal worse objectivity. In addition, from the point of abnormal return, analysts in employment relationships with majority shareholders of funds and with a low reputation damage the interests of common investors.

Trade Credit, Risk Sharing, and Inventory Financing Portfolios

As an integrated part of a supply contract, trade credit has intrinsic connections with supply chain coordination and inventory management. Using a model that explicitly captures the interaction of firms’ operations decisions, financial constraints, and multiple financing channels (bank loans and trade credit), this paper attempts to better understand the risk-sharing role of trade credit—that is, how trade credit enhances supply chain efficiency by allowing the retailer to partially share the demand risk with the supplier. Within this role, in equilibrium, trade credit is an indispensable external source for inventory financing, even when the supplier is at a disadvantageous position in managing default relative to a bank. Specifically, the equilibrium trade credit contract is net terms when the retailer’s financial status is relatively strong. Accordingly, trade credit is the only external source that the retailer uses to finance inventory. By contrast, if the retailer’s cash level is low, the supplier offers two-part terms, inducing the retailer to finance inventory with a portfolio of trade credit and bank loans. Further, a deeper early-payment discount is offered when the supplier is relatively less efficient in recovering defaulted trade credit, or the retailer has stronger market power. Trade credit allows the supplier to take advantage of the retailer’s financial weakness, yet it may also benefit both parties when the retailer’s cash is reasonably high. Finally, using a sample of firm-level data on retailers, we empirically observe the inventory financing pattern that is consistent with what our model predicts. This paper was accepted by Vishal Gaur, operations management.