Mutual Fund Firms Research Articles

Leveling the playing field? The effect of disclosing fund manager activeness to individual investors

As of April 2018, several of the largest U.S. mutual fund firms have been imposed to disclose a measure of fund manager activeness to retail investors. We evaluate the effectiveness of this intervention. We find that, even for those funds with a large overlap of holdings with the benchmark, no measurable effort to increase management activeness can be observed subsequent to the imposed disclosure. By contrast, investors strongly respond to the intervention. However, an analysis of investor reaction suggests that they do not rationally trade on the newly available information. We discuss our results and propose potential disclosure improvements.

Predictors of Youth’s intention towards investment in Mutual funds

Mutual funds serve as a vehicle for ordinary investors to place their assets in a professional funds management system. It makes it easier for the general public to access the Indian financial market. The Indian mutual fund business is expanding quickly, as evidenced by the year-over-year increase in assets managed by different AMCs. Assets Under Management (AUM) of Indian Mutual Fund Industry as on December 31, 2022 stood at ₹ 39,88,735 crore. The AUM of the Indian MF Industry has grown from ₹ 7.60 trillion as on December 31, 2012 to ₹39.89 trillion as on December 31, 2022 more than 5-fold increase in a span of 10 years (Association of Mutual Fund in India Report 2022). When opposed to investing in the stock market, mutual fund investing is less risky. Risk-averse investors are drawn to invest their resources in the financial markets by lower risk, modest rewards, and professional management. In order to better understand the demands and preferences of a growing generation, financial institutions and mutual fund firms need to do research on the factors that influence new investors' purchases of mutual funds. New investors, sometimes known as "freshers," frequently lack financial education and experience, and several factors might have an impact on how they make decisions. For the benefit of financial institutions and mutual fund businesses, this study intends to investigate and comprehend these issues. Financial institutions and mutual fund firms can better address the demands of this market by tailoring their marketing tactics and product offerings by looking into the elements that affect new investors' decisions to buy mutual funds. The purpose of this paper is to understand the various predictors of mutual fund investment intention of youth. This study uses quantitative and cross-sectional approach wherein questionnaire-based survey was done to collect responses from prospective individual investors and SPSS have been used to establish the hypothesized relationship between the constructs.

Critiquing the Performance of Chosen Mutual Fund Firms in Large Cap Equity Investments Indexed in Nifty 100

Critiquing the Performance of Chosen Mutual Fund Firms in Large Cap Equity Investments Indexed in Nifty 100

Impact of macroeconomic variables on the performance of stock exchange: a systematic review

PurposeThis paper aims to identify various macroeconomic variables that affect the stock market performance of developed and emerging economies. It also investigates the effect of these factors on the stock markets of both economies. The impact of these variables on broad market indices and sectoral indices is investigated and compared too.Design/methodology/approachThe publications for the study were retrieved from databases such as Emerald Insight, EBSCO, ScienceDirect and JSTOR using the keywords “Macroeconomic variables” and “Stock market” or “Stock market performance.” The result demonstrated a growing corpus of scholarly work in the domain of stock market. The study was carried out separately for each macroeconomic indicator. Given a large number of articles under consideration, the authors began by reading the titles and abstracts of all publications to identify those that were relevant. The papers are evaluated in Excel and the articles for review range from 1972 to 2021.FindingsThe authors found that gross domestic product (GDP), FDI (Foreign Direct Investment) and FII (Foreign Institutional Investment) have a positive effect on both emerging and developed economies’ stock market while gold price has a negative effect. Interest rates had a negative impact on both economies except for a few developing countries. The relationship with oil prices was positive for oil exporting countries while negative for oil importing countries. Inflation, money supply and GDP are the macroeconomic variables that have the same effect on sectoral indices as they do on broad market indices. The impact was sector-specific for the remaining variables.Research limitations/implicationsThis paper gives an overview of relation and effect covering variety of macroeconomic variables and stock market indices. Still, there is a scope for further research to analyze the effect on thematic, strategy and sectoral indices. A longer time horizon with new variables, such as bank deposit growth rate, nonperforming assets of banks, consumer confidence index and investor sentiment, can be studied using high-frequency data. This research may help stakeholders adopt and manage their policies during a crisis or economic slump.Practical implicationsThis study will assist investors, researchers and educators in the fields of economics and finance in understanding how macroeconomic factors affect the stock market. Furthermore, this study can guide in portfolio diversification strategy across multiple sectors by examining the impact of macroeconomic factors specific to sectoral indices. This paper provides insight into society and researchers since it integrates a number of macroeconomic variables and their interaction with the stock market. It may also help pension funds and mutual fund firms to hedge their funds and allocate equity portfolios.Originality/valueWith respect to India, this study looked at new macroeconomic variables and sectors. It contrasted the impact of these variables in developed and developing economies. The effect of broad and sectoral stock indexes was also investigated and compared. The authors examined how these variables responded during crisis and economic downturns by using articles from a longer time frame. This research also looked into how changing the frequency of data for the variables altered stock performance. This paper emphasized the need for more research into thematic, strategy and broad market indices, such as small-cap and mid-cap indices.

Why is there so much side-by-side management in the ETF industry?

We document the dramatic rise of side-by-side management (“SbS”) in the global ETF industry. As of 2018, around 60% of individual ETF fund managers manage mutual funds in a SbS arrangement, most of which are “active” mutual funds. We argue that mutual fund firms employ SbS arrangements to exploit institutional client relationships of their mutual fund managers to help channel mutual fund TNA at risk of withdrawal to the firms’ new ETF business. Mutual fund managers are most likely to become SbS ETF managers if they generate revenue from institutional TNA and face strong ETF competition. SbS initiations lead to discretionary institutional (but not retail) outflows from mutual funds and contemporaneous inflows in the ETFs overseen by those same SbS managers. Client level holdings tests link these flows to those institutional clients with likely stronger relationship to the SbS managers, suggesting that SbS arrangements are an important tool for traditional mutual fund firms to meet and manage the rise of ETFs.

Under pressure: exploring pressures for corporate social responsibility in mutual funds

PurposeThis empirical study seeks to understand how mutual fund firms interpret conflicting pressures to conform or differentiate in the context of corporate social responsibility (CSR). Research suggests that organizations engage in practices that conform to industry standards in order to be seen as legitimate members of their industry. Other studies suggest that organizations differentiate themselves in order to compete and outperform their rivals. Pressures for organizational conformity and differentiation are explored in two types of organizations in the mutual fund industry: socially responsible investment (SRI) and non-SRI firms.Design/methodology/approachThe research is based on qualitative in-depth interviews with twenty-six mutual funds.FindingsThe analysis revealed that pressures for conformity and differentiation were salient among mutual fund executives but emphasized differently for the two types of mutual funds.Originality/valueThe study concluded by suggesting SRI firms use both strategies of conformity and differentiation to amplify the message that they adhere to the values of CSR.

Labor Mobility and Capital Misallocation in the Mutual Fund Industry

If capital won’t come to fund managers, fund managers will go to capital. I document that fund managers move across mutual fund firms to manage amounts of capital that better match their skill, which improves the allocative efficiency of capital across fund managers. For causal identification, I exploit exogenous shocks to fund managers’ ability to switch firms due to state-level changes to non-compete laws. In states that strengthen the enforceability of non-compete agreements, the propensity of fund managers to switch mutual fund firms is halved, capital misallocation across managers increases by about 10%, and the sum of monthly value added of managers declines by over $25 million. These results indicate that fund managers’ mobility across firms plays an important role in the efficient allocation of capital within the mutual fund industry.

Matching Capital and Labor

ABSTRACTWe establish an important role for the firm by studying capital reallocation decisions of mutual fund firms. The firm's decision to reallocate capital among its mutual fund managers adds at least $474,000 a month, which amounts to over 30% of the total value added of the industry. We provide evidence that this additional value added results from the firm's private information about the skill of its managers. The firm captures this value because investors reward the firm following a capital reallocation decision by allocating additional capital to the firm's funds.

Investor-centric strategies for Indian mutual fund industry: inferring from the behavior of individual investors

This research proposes a roadmap for investor-centric strategies to mutual fund firms in India for expanding their client base consists of current and potential investors. Based on the responses of 800 investors collected under a perception survey, using discriminant function analysis, the study works out the sustainable marketing mix variables that impel innovation in product design and distribution for Indian mutual fund industry. The study suggests the revision of prevailing investor strategies profiling with novel products of fewer risks, better governance and regulations, speedy and efficient grievance redressal and professionalism in investor services can impart market dynamism to mutual fund instruments in Indian context. However, the post-investment behavioral paralytics like disposition effect, cognitive dissonance and herd behavior are much critical in determining the strategic effects.

Testing the relationship between intellectual capital and a firm's performance: an empirical investigation regarding financial industries of Pakistan

The purpose of this study is to investigate the intellectual capital (IC)'s performance and its impact on the financial performance of 78 listed financial industries of Pakistan from 2008 to 2013. VAIC™ model is applied to measure the efficiency of IC and its components. The empirical results obtained from the study clearly indicate that IC is an important determinant of the financial efficiency of the Pakistani financial firms. However, when IC is divided into parts, the performance of human capital plays a significant role. As a whole, all companies have relatively higher human capital performance than structural and tangible capital efficiencies. This study makes a valuable addition in the literature by selecting all the financial sectors of Pakistan (banks, life and non-life insurance firms, modaraba firms, mutual fund firms and leasing firms) to investigate the intellectual capital-performance relationship as the previous researchers focused only on one or two financial sectors.

Advertising appeals across varying economic and regulatory conditions: A longitudinal content analysis in the mutual fund industry

This research investigates the relationship between the utilization of various appeals in mutual fund advertisements and prevailing market, and regulatory conditions during the period 2000—2009. Mutual fund firms promote their investment products utilizing an array of advertising appeals, including those that highlight performance, product and consistency. We hypothesize that the application of these appeals varies over time and according to market conditions. In addition, the research considers the 2007 regulatory efforts mandating the inclusion of mutual fund expense information in advertisements that promote fund performance. A longitudinal content analysis is utilized to survey the presence and prevalence of various advertising appeals by mutual fund providers in Money magazine from 2000 to 2009. Results reveal that appeal usage varies over time and by market performance. Appeals focusing on performance and product are strongly correlated with market performance, whereas appeals relating to trust are correlated with subpar market performance. In addition, the use of cost information, broadly defined, has become more important over the 2000–2009 period independent of market performance. The implications of these findings and their relationship to government regulation are also discussed.

Matching Capital and Labor

We establish an important role for the firm by studying capital reallocation decisions of mutual fund firms. At least 30% of the value mutual fund managers add can be attributed to the firm's role in efficiently allocating capital amongst its mutual fund managers. We find no evidence of a similar effect when a firm hires managers from another firm. We conclude that an important reason why firms exist is the private information that derives from the firm's ability to better assess the skill of its own employees and the use of that information to efficiently allocate capital to labor.

Investment Performance Ranking of Superannuation Firms

Investment performance studies of pension or mutual funds have overall been too statistically inconclusive to create definitive rankings to help investors make fund selection decisions. This paper presents an alternative approach based on comparing the pension or mutual fund firms themselves which are highly diversified composite portfolios aggregated over all individual portfolios managed by the firms. Performance data of managed fund firms are more useful for investors because we show here that their statistics are more stable and predictable than those of individual portfolios which are subject to more random influences such as selection bias. This paper overcomes the pitfalls of the Sharpe ratio in ex-post performance ranking by using a new metric for the performance of the composite portfolio of a firm. The metric is risk-adjusted by the volatility of the firm’s benchmark, defined by the aggregate asset allocation of the firm. In an empirical study using unique data, we measure the performance of 115 major Australian superannuation firms. The results show that using the new metric the investment performance ranking of the firms is persistent. We identify that higher operational costs are correlated significantly with lower net investment performance. We indicate how the performance ranking of the firms can help investors make fund selection decisions.

Competitive Response to Employee Mobility: Evidence From Mutual Fund Companies

Employee mobility has been shown to have competitive implications for firms, yet scant research has examined how firms respond to this event. This study examines how firms cope with the loss of an individual's personal resources as a result of mobility and make strategic actions to reduce the costs incurred by such loss. In this study, I investigate how mutual fund firms that undergo the exit of fund managers increase the production of a team-managed fund as an attempt to reduce the dependency of a fund on a particular individual and increase the sharedness of information resided in individuals. The analysis shows support for this idea. Spatial proximity between the source and recipient firms is further considered as one dimension that yields differential competitive challenges and responses of the source firm. The theoretical contributions of the present study are discussed.

Portfolio Choice toward Bank Related and Non Bank Related Mutual Funds in Thailand: A Case of Bangkok

In Thailand, bank subsidiaries constitute 90% of market share of mutual fund industry. The stated fact leads us to categorize mutual fund firms into: Bank related mutual funds and Non bank related mutual funds and try to understand how investors perceive and choose among the two types mutual fund. This study focuses on Long Term Fund (LTF) and Retirement Mutual Fund (RMF). Investors in LTF and RMF are highly addicted to tax advantage. So, this study investigates more on investors’ portfolio as if holding period of LTF is extended from 5 to 10 years. The results show that determinant factors for choosing between bank and non bank mutual fund are the perception of convenience and confidence toward them. Extended holding period causes investors to allocate less into LTF and RMF (28.22% to 22.82%) which is 19.14% drop in LTF and RMF. This implies a loss of large amount of asset under management.

Institutional Investors and International Diversification in the U.S. Restaurant Industry

ABSTRACT Although U.S. restaurant firms face high risks in diversifying their operations internationally, there are no previous studies that motivate international diversification. If international diversification is risky, then why do restaurant firms go abroad? This study focuses on one potential explanation, namely the institutional investor ownership, to determine if it can explain the internationalization behavior in the restaurant industry. According to previous research, ownership by pressure-sensitive groups (bank and insurance firms) is negatively related to international diversification and ownership by pressure-resistant groups (pension funds, mutual funds, and brokerage firms) is positively related to international diversification. The results for restaurant firms reported in this study partially confirm previous findings. While pension and mutual fund firms support international diversification, pressure from investments by banking firms leads to lower international diversification. Investmen...

Refraining from Imitation: Professional Resistance and Limited Diffusion in a Financial Market

Why do some practices not spread? Although this is an important question for both diffusion theorists and those interested in institutional change, we know surprisingly little about the limitations on diffusion because most diffusion studies sample on successful diffusion. I address the question of why some practices fail to spread by introducing the concept of a “deviance discount.” A deviance discount is a systematic downgrading of the observed adoption performance of controversial practices, which limits the contagion of such practices. I test and find qualitative and quantitative support for my thesis in the product introduction behavior of Swedish mutual fund firms. My findings hold implications for diffusion theory and theories of endogenous institutional change.

The "Ethics" of Ethical Investing

There appears to be an implicit assumption by those connected with the ethical investment movement (e.g., ethical investment firms, individual investors, social investment organizations, academia, and the media), that ethical investment is in fact ethical. This paper will attempt to challenge the notion that the ethical mutual fund industry, as currently taking place, is acting in an ethical manner. Ethical issues such as the transparency of the funds and advertising are discussed. Ethical mutual fund screens such as tobacco, alcohol, gambling, and the military are preliminarily examined to better determine whether they can actually be defined as "ethical" screens as opposed to merely social, political, or religious screens. A code of ethics for ethical investment is constructed by which ethical mutual fund firms can be audited for ethical compliance.

To Load or Not to Load? A Study of the Marketing and Distribution Charges of Mutual Funds

A mutual fund firm's ability to charge for marketing funds is a function of more than past financial performance. Front-end loads and annual fund marketing charges are in part determined by customer services, whether deferred marketing charges can be imposed, and financial performance. The results imply that, at least in the short run, mutual fund firms should focus relatively more on fund marketing and service-related characteristics of their funds than on financial performance. Mutual fund investors seem to demand high levels of services in exchange for high marketing charges.