Funds Target Research Articles

Monetary policy and fragility in corporate bond mutual funds

We document aggregate outflows from corporate bond mutual funds days before and after the announcement of increases in the Federal Funds Target rate (FFTar). To rationalize this phenomenon, we build a model in which funds’ net-asset-values (NAVs) are stale and investors strategically redeem to profit from the mispricing when they learn about the increases of FFTar. Consistent with the model’s predictions, we find that stale NAVs and loose monetary policy environments weaken (strengthen) outflows sensitivity to increases in FFTar during illiquid (liquid) market conditions. Our results highlight when and how monetary policy could systematically exacerbate the fragility of corporate bond funds.

Forecasting the direction of the Fed's monetary policy decisions using random forest

AbstractThe federal funds target rate is commonly considered to be an important indicator of the state of the US economy and is of keen interest to individual investors, financial firms, and other economic agents. In this paper, we focus on the discrete changes in the federal funds target rate during the period from January 1994 to June 2022 and apply the ordinal forest model, a random forest‐based prediction method for ordinal response variable. We examine the model's performance with 45 predictor variables which include macroeconomic and financial variables as well as forward‐looking survey measures. For an accurate and honest measure of the model performance, we employ single‐period‐ahead out‐of‐sample forecasting accuracy instead of evaluating the in‐sample fit. Our empirical results show the ordinal forest method significantly outperforms a benchmark that uses the most recent data among previous studies on federal funds target rate. We find that TB spread is the most informative from a forecasting perspective along with GDP, initial jobless claims, and survey measures.

Success factors of real estate crowdfunding projects: Evidence from Spain

AbstractReal estate crowdfunding is a relatively new alternative financing and investing method. This research aims to identify factors which might increase investors' willingness to participate in real estate crowdfunding campaigns. We analyse 195 lending-based real estate crowdfunding campaigns from four Spanish platforms. Project success is measured by duration, i.e. the time required to reach the funding target. We assess the impact of the funding target, the annual return, the loan duration, several risk-related metrics and the minimum investment amount. We find that the higher the funding target and the minimum investment amount, the longer it takes to reach the target. We document that investors prefer projects where the maturity of the loan is shorter. We also find that construction-type projects reach the funding target faster than other type of fundraising goals. At the same time, we do not find any association between the annual return or risk-related metrics and project success. To assure successful fundraising, real estate crowdfunding platforms should prioritize those real estate projects which are highly popular among investors (i.e. construction-type projects with short maturity). Real estate developers, in turn, should crowdfund projects which are demanded by the crowdinvestors and use their traditional financing methods for the remaining projects.

Untangling signalling strategies contributing to overfunding in reward-based crowdfunding

Crowdfunding is an Internet-based fundraising method that relies on contributions from a large crowd of investors to fund innovative and risky projects. The aim of this paper is to analyse which combinations of signals commonly studied for crowdfunding success lead to overfunding. Based on the information asymmetries between fund-seeking entrepreneurs and the crowd, this paper draws on signalling theory to explore the elements of campaign design that contribute to overfunding (i.e. raising at least 10 % above the funding target). The paper focuses on the entrepreneur's identity as an individual or corporation, pitch video length, budget explanation length, number of images, project abstract length, and number of updates by the entrepreneur. Qualitative comparative analysis (QCA) is performed using publicly available data sourced from 257 socially oriented projects from a reward-based crowdfunding platform. The results show the importance for entrepreneurs of using images and constantly communicating with the crowd. The results also reveal a series of configurations of design features that result in overfunding. These findings have practical implications for the design of reward-based crowdfunding campaigns and contribute to a better understanding of how economic agents interact within crowdfunding.

Self-operation or Authorization? Decision structure of crowdfunding supply chains with IP derivative products

Reward-based crowdfunding has become a widely adopted financing mechanism in the creative economy, particularly for IP derivative products, resulting in a typical crowdfunding supply chain comprising an IP owner, a crowdfunding platform, and a manufacturer. Our study aims to build a theoretical model to explore the strategic issue regarding how to design the decision structure of crowdfunding supply chains with IP derivative products. Our analytic results reveal that when the product quality remains consistent across decision structures, the IP owner prefers the self-operation structure (i.e., structure O) if the quality level is either low or high; otherwise, the authorization structures are preferred. When the platform’s commission rate is relatively low, authorizing the manufacturer (i.e., structure M) outperforms authorizing the platform (i.e., structure T), which is counter-intuitive. However, structure O always achieves the highest funding amount and can lead to a tripartite win–win situation under certain conditions. When the quality level is determined endogenously by the creator, in addition to structure O, structure T can also achieve the highest funding target and lead to a tripartite win–win situation in some cases by regulating the quality level. Notably, due to the double marginalization effect, structure M always leads to a sub-optimal outcome for the manufacturer regardless of whether the quality is constant or endogenous.

Role of successive round as a quality signal in equity crowdfunding: Novel evidence from the perspective of investors' preferences.

Equity crowdfunding provides entrepreneurs and founders the opportunity to raise funds from a large number of potential investors, using quality signals to influence their investment decisions. Drawing from the lens of signaling theory and the elaboration likelihood model, this study explores the role of successive equity crowdfunding rounds as a quality signal in shaping investors' preferences in crowdfunded firms and its influence on their investment decisions. Our findings reveal that successive equity crowdfunding rounds serve as quality signals, modeling investors' preferences and thereby resulting in a high magnitude of success factors. The successive round is a strong quality signal that has a positive and significant impact on investors' investment decisions in subsequent equity crowdfunding rounds. The increasing preferences of investors due to the successive round augments the magnitude of success factors and helps entrepreneurs in successfully achieving large funding targets, high overfunding, and attracting a large number of investors in subsequent equity crowdfunding campaigns, even with a low level of equity offering.

A Survey of Private Debt Funds

Abstract Despite its large and increasing size in the United States and Europe, the private debt (PD) market, compared to the bank and syndicated loan markets, has been researched little. In this paper, we survey U.S. and European investors with private debt assets under management (AuM) of over $390 billion. These investors are primarily direct lending funds. We ask the general partners (GPs) how they source, select, and evaluate deals; how they think of private debt relative to bank and syndicated loan financing; how they monitor their investments; how they interact with private equity (PE) sponsors; and how they view the future of the market. Respondents provide primarily cash-flow-based loans and believe that they finance companies and leverage levels that banks would not fund. Direct lending funds target unlevered returns that appear high relative to their risk. They use leverage in their funds, but appreciably less than banks and collateralized loan obligation funds (CLOs). They use and negotiate for both financial and negative covenants to monitor their investments. The presence of PE sponsors helps them lend more and craft more effective covenants. U.S. and European funds are similar along many dimensions, but European funds rely less on PE sponsors and compete more with banks. Overall, the private debt market is both different from and shares characteristics with bank loan and syndicated loan markets. (JEL G23, G30, G32)

Contexts of Convenience: Generalizing from Published Evaluations of School Finance Policies.

Recent attention to the causal identification of spending impacts provides improved estimates of spending outcomes in a variety of circumstances, but the estimates are substantially different across studies. Half of the variation in estimated funding impact on test scores and over three-quarters of the variation of impacts on school attainment reflect differences in the true parameters across study contexts. Unfortunately, inability to describe the circumstances underlying effective school spending impedes any attempts to generalize from the extant results to new policy situations. The evidence indicates that how funds are used is crucial to the outcomes, but such factors as targeting of funds or court interventions fail to explain the existing pattern of results.

Factors influencing US equity-crowdfunded companies’ ability to survive

ABSTRACT This study investigates the factors being associated with equity-crowdfunded companies’ likelihood of survival in the US. We focus on factors observable to crowdinvestors, either being set by entrepreneurs (signals) or being non-alterable (determinants), at least in the short run. Such observable factors at the time of crowdinvesting include company and campaign characteristics, growth potential, and company riskiness. Cox proportional hazards model is used on a sample of 429 US equity-crowdfunded companies. We find that 89% of the companies survived for a minimum of three years after a successfully funded initial equity offering. This survival rate is around ten percentage points higher than in Europe. We document that equity retention, funding goal, and current year revenue estimate are associated with the likelihood of building an enduring business. Higher proportion of equity offered to crowdinvestors signals lower investment quality and thus lower probability of survival. In contrast, companies with higher funding target and current year revenue have better prospects for survival after a successful equity offering. The funding goal affects the probability of survival through the capital intensity channel; if a company in a capital intense industry has been successfully funded, the threat from the competitors is lower given the high entry barriers.

Mutual Fund Investment Strategies for Retail Investors: An Empirical Study in the Light of Market Movements

Mutual fund investment strategies provide retail investors with diversified and professionally managed portfolios, making them an attractive option for wealth accumulation. One popular approach is index investing, where funds track a market index, aiming to replicate its returns. This strategy offers low costs and broad exposure. On the other hand, active management involves fund managers making investment decisions to outperform the market. While potentially yielding higher returns, it comes with higher fees. Asset allocation is another key strategy, where investors diversify their holdings across various asset classes like stocks, bonds, and commodities. This helps manage risk and optimize returns based on individual risk tolerance and financial goals. For those seeking stability, income funds focus on generating regular dividends, suited for conservative investors. In contrast, growth funds target capital appreciation by investing in companies with high growth potential. Careful consideration of these strategies, aligned with one's financial objectives and risk appetite, is essential for retail investors to make informed mutual fund choices.

Crowdfunding With Cognitive Limitations

To achieve the desirable funding target in a crowdfunding campaign, the project creator needs to accurately anticipate the pledging behaviors of contributors with practical cognitive limitations. In this paper, we present a study on how the contributors’ cognitive bounded rationality affects the creator’s campaign decisions. Specifically, we consider a two-stage crowdfunding model, where a creator first announces the project decisions (i.e., price and the minimum number of required contributors), and then the contributors choose their pledging behaviors (whether and how to contribute) as they arrive stochastically. We consider the cognitive hierarchy model, where contributors are classified into different levels according to their capability of anticipating other contributors’ behaviors. Surprisingly, we show that the cognitive limitation may improve the chance of project success, especially when the crowdfunding target is high. We prove that with a high average contributor cognitive level, a low funding target, and a low difficulty of motivating the lowest cognitive level contributors, the creator can achieve a close-to-optimal revenue by simply assuming that contributors are fully rational. Otherwise, ignoring the contributors’ cognitive limitations can lead to a significant revenue loss.

ANALYSIS OF FINANCIAL PERFORMANCE MANAGEMENT OF VILLAGE FUND ALLOCATION BASED ON EFFECTIVENESS AND GROWTH RATIO IN SUNGAI ARA VILLAGE 2020-2022

This study aims to find out how well the Financial Performance of Village Fund Allocation Management is based on the Effectiveness Ratio and Growth Ratio in Sungai Ara Village. The type of research used is a quantitative research type because the data collected is in the form of figures from the Village Fund Allocation (ADD) financial reports in the Village Revenue and Expenditure Budget from 2020-2022. Data collection techniques used are documentation techniques and literature studies. The data analysis technique used is to use a qualitative descriptive approach with the formula for the ratio of effectiveness and growth ratio. The results of the study indicate that in general the financial performance of the Sungai Ara Village Government has been good in managing the Village Fund Allocation finances. Where based on the ratio of the effectiveness of managing the Village Fund allocation for 2020-2022 it is categorized as effective. This shows that the ability of the Sungai Ara Village government to achieve the Village Fund target has been going well. Then based on the ratio of Village Fund income growth every year it fluctuates. However, if seen from the percentage of growth, it is still low every year. This shows that the ability of the Sungai Ara Village government to maintain and increase success in managing the Village Fund Allocation finances that have been achieved every year is still low. This means that the financial performance of Sungai Ara Village, Indragiri Hilir Regency, in terms of the management of Village Fund Allocations based on the growth ratio in 2020-2022, is in the low category.

Sovereign Wealth Funds and Corporate Investments: Evidence from Norway Sovereign Wealth Fund target firms

Using a sample of 105 Indian firms acquired by the Norwegian Sovereign Wealth Funds, we investigate whether Sovereign Wealth Fund investments affect the corporate investments of firms., particularly, whether Norway sovereign wealth fund serves as a disciplinary mechanism in reducing the mangers opportunistic behavior. Our findings reveal that Norway Sovereign Wealth Fund ownership and size reduce corporate investments, supporting the political agenda hypothesis, suggesting that the firm must decide on taking large ownership stakes of Norway Sovereign wealth funds ownership to attenuate mangers opportunism behavior and political agendas. Our findings are robust to an alternative measure of sovereign wealth funds and endogeneity concerns.

Joint advertising and ordering decisions under the pre-sales crowdfunding

Our study considers a company launching new product on pre-sales crowdfunding platform and explores the joint advertising and ordering decisions in mass market thereafter. Under the “AON” mechanism, we construct profit-maximizing models to examine the impact of pledged amount on the company’s decision on advertising expense, order quantity and funding target. The results show that the optimal order quantity increases with the pledged amount in crowdfunding, and the company won’t promote new product in mass market until the pledged amount reaches a funding threshold, and the advertising expense increases with the pledged amount since then. In addition, we figure out the feasible scope for the funding target and suggest the company set the target within the scope, to ensure the project profitability. Furthermore, we demonstrate that the expected pledged amount won’t increase with the funding target, and the optimal funding target would be the lower bound in its feasible scope, to improve the campaign success. Finally, we conduct numerical analysis to verify our theoretical results.

ESG-focused hedge fund activism

<p style="text-align:justify"><span style="font-size:10.5pt"><span style="font-family:等线"><span dir="ltr" lang="EN-US" style="font-family:"Cambria",serif"><span style="color:black">Investment funds are increasingly focusing on ESG issues, seeking to contribute to improving environmental, social, and governance concerns. ESG-focused investing involves promoting good ESG performance and may result in a decrease in expected financial returns. This may lead to a conflict between solely profit-focused shareholders and ESG-focused investors, who may respond accordingly. As such, a firm's ESG commitment may trigger several events that can affect the stock price. A firm's ESG commitment may increase its stock price; however, the end of such commitment may also positively affect the stock price. Hedge funds may consider this in their activism which may reshape the way hedge funds target firms and influence their actions accordingly.</span></span></span></span></p>

Analysis of Factors Influencing the Success of Funding in Equity Crowdfunding Registered in the Financial Services Authority in Indonesia

This study aims to determine and test the effect of intellectual capital signals and the level of uncertainty on the success of funding on equity crowdfunding platforms that are officially registered with the financial services authorities in Indonesia. The population of this study is prospectuses for open offers made by MSMEs on equity crowdfunding platforms in Indonesia in 2019 – 2021, with a total of 147 prospectus observation data. The sampling technique used is purposive sampling, which is a sampling technique with specific criteria. Multiple regression analysis is the method to test the hypothesis. This study argues that intellectual capital and the uncertainty presented in an open offer in equity crowdfunding can be perceived by novice investors or crowd funders as a signal of business quality and encourages them to invest and meet funding targets by exploiting the role of signalling theory in reducing information asymmetry. The study results show that only business alliances indicate intellectual capital, and financial projections indicate the level of uncertainty that has a positive and significant effect on the number of funds that indicate successful funding. Meanwhile, business experience and product innovation, indicators of intellectual capital, and date debt, indicators of uncertainty, have no significant effect. Based on these findings, the success of equity crowdfunding, officially registered in Indonesia, is influenced by business alliances and financial projections. This research provides valid implications for entrepreneurs, platform managers, and policymakers/authorities. Keywords: funding success, equity crowdfunding, intellectual capital, level of uncertainty

Allocation of federal funding to address the opioid overdose crisis in the criminal legal system

IntroductionThe opioid overdose crisis remains a chief public health concern in the United States, and people involved in the criminal legal system are among the most vulnerable to opioid related harms. This study aimed to identify all discretionary federal funding allocated to states, cities, and counties targeting the overdose crisis for criminal legal system-involved populations in fiscal year (FY) 2019. We then aimed to assess the extent to which federal funding was allocated to states with the highest need. MethodsWe collected data from publicly available government databases (N = 22) to identify federal funding targeting opioid use disorder in criminal legal system–involved populations. Descriptive analyses examined the extent to which funding allocated per person in the criminal legal system-involved population was associated with funding need, proxied by a composite measure of opioid mortality and drug-related arrests. We created a generosity measure and dissimilarity index to assess the degree to which funding matched need across states. ResultsMore than 590 million dollars were allocated across 517 grants by 10 federal agencies in FY 2019. About half of states received less than $100.00 dollars per capita in the state criminal legal system-involved population. Funding generosity ranged from 0 % to 504.2 %, with more than half of states (52.9 %, n = 27) receiving fewer dollars per opioid problem than the US average. Further, a dissimilarity index indicated that about 34.2 % of funding (~$202.3 million) would have to be reallocated to distribute funding more evenly across states. ConclusionsResults suggest that additional efforts are needed to more equitably distribute funds to meet the needs of states with more severe opioid problems.

The application of the Social Vulnerability Index (SoVI) for geo- targeting of post-disaster recovery resources

While planning the recovery from two destructive flood events in South Carolina in 2015 and 2016, the South Carolina Office of Resilience (SCOR) employed an evidentiary-based tool to assist in geographical targeting of federal flood recovery funding to those areas with the greatest damage and with the most socially vulnerable populations based on an index of social vulnerability (SoVI). This paper examines the relationship between the initial selection of areas targeted for applicant recruitment and the actual recovery outcomes (e.g., completed housing projects) focused on two specific questions: 1) were the completed recovery projects (beneficiaries) located in the initial targeted census tracts defined as high social vulnerability and high verified flood loss; and 2) was the measured social vulnerability of the census tract successful in characterizing the demographics of the actual beneficiaries with completed housing restoration? Findings demonstrated that recovery funding applicants were among the most socially vulnerable within a tract, and recovery funding beneficiaries were among the most vulnerable within the applicant group when compared to Census tract averages but had less correlation with the aggregate SoVI-defined levels. While SoVI proved useful in targeting broad areas for applicant recruitment that contained those most affected and most in need, it was less successful in identifying the individual characteristics of beneficiaries in those tracts due to the spatial mismatch between individual (beneficiaries) and areal (census tracts) enumeration units. This research reveals an operational role for social vulnerability in targeting efforts in an apolitical way to achieve a more equitable applicant pool for recovery dollars.

Beyond headcount statistics: Exploring the utility of energy poverty gap indices in policy design

Recent energy price spikes have led to increased energy poverty among low-income households living in inefficient homes. Accurate statistics on energy poverty help inform resource allocation and better target relief schemes and retrofit funds. Existing indicators are predominantly defined in terms of a headcount ratio – the share of population living below a certain threshold or poverty line. In this paper we draw from the literature on income poverty evaluation to argue that the use of more elaborate energy poverty gap indices can substantiate the design and monitoring of energy poverty policies, by not only considering incidence but also intensity and inequality of energy poverty across households. We demonstrate that the choice for a particular energy poverty (gap) indicator makes the implicit welfare choices of energy poverty policies explicit. We illustrate our arguments for the case of the Netherlands, using recently developed microdata statistics on energy poverty, and an imposed energy price shock. We show that spatial targeting of relief funds based on incidence would neglect the full depth of energy poverty deprivation. Finally, we argue that visualisation techniques from the income poverty literature help to comprehend different poverty orderings and draw comparisons between time periods, regions, and subgroups.

Analisis Kinerja Pengelolaan Keuangan Dana Desa Berdasarkan Rasio ‎Efektivitas dan Rasio Pertumbuhan Pada Kantor Desa Limbur Merangin ‎Kabupaten Merangin

This study aims to find out how Village Fund Finance is managed, to find out the factors that influence the effectiveness of Village Fund financial management, to find out how to manage Village Funds more effectively and to find out how well the financial performance of the Limbur Merangin Village Fund is, Merangin Regency. The type of research used is a type of qualitative and quantitative research (mixed method). Quantitative research because the data collected is in the form of figures from the financial reports of the Village Fund Allocation (ADD) on the Village Revenue and Expenditure Budget (APBDesa), while qualitative research is the process of inductively thinking processes related to the dynamics of the relationship between observed phenomena, and always use scientific logic. The results of the study show that in general the financial performance of the Limbur Merangin Village Government of Merangin Regency has been good in managing the finances of the Village Fund Budget. Where is the effectiveness ratio of the Limbur Merangin Village Fund during 2017-2022 in the effective category. This shows that the ability of the Limbur Merangin Village government to achieve the Village Fund target has been going well. The income growth ratio, the Village Fund's income growth fluctuates every year so that the financial performance of the Limbur Merangin Village government is not good in terms of managing the growth ratio.