Mutual Investments Research Articles

Do Local Investors Know More? Evidence from Mutual Fund Location and Investments

Although investors' preference for nearby investments has been widely documented in the literature, there is no apparent consensus on whether local investors have any informational advantage. Analyzing the equity holdings of a large sample of actively managed mutual funds, I find evidence consistent with a perception in the mutual fund industry that local funds have an informational advantage. However, the portfolio of mutual funds' local holdings do not display significant superior performance relative to the portfolio of their distant holdings. Using a parsimonious model, I hypothesize that the profitability of local informational advantage will be low due to price impact when there is a relatively large population of local agents who trade on similar private information. Consistent with this hypothesis, I find that funds do earn superior returns on local stocks for which the aggregate local capital is limited and hence the price impact of local trades is likely to be small. Overall, the results suggest that although local investors have some informational advantage, this local advantage does not lead to superior abnormal performance by local managers because of the price impact of their trading.

Alternative Investment Strategies

FALL 1999 O ften alternative investment strategies are lumped into two areas: managed futures and hedge funds. Investors have to be reminded that private equity, private debt, real estate, and credit derivatives all form part of the alternative to the long-only world of mutual fund stock and bond investments. In contrast to other books about the alternative investment firmament, this work directly provides insight into an array of alternative investment strategies. The book brings together chapters on private equity and private debt as well as what are commonly called skill-based investment strategies such as hedge funds, managed futures, and currencies, and provides detailed insight into developments affecting asset-backed securities, emerging market fixed-income debt, credit and insurance derivatives, and risk management within these strategies. More precisely, the book contains ten sections. In the introduction, the editor provides the wide range of questions surrounding alternative investments from an investor’s viewpoint. In the second section, on private equity and venture capital, two chapters represent the pertinent investment risks, liquidity, and regulatory issues. In the third section, the authors discuss skill-based strategies that include market-neutral investing, multimanager products, managed futures, commodities, and currencies. In the fourth section, three chapters address hedge fund performance as well as risk management issues. For instance, Chapter 12 provides a comparison of return patterns on traditional and alternative investments and concludes that hedge funds and CTAs have different trading styles and opportunities than the traditional stock and bond mutual fund managers. The fifth section on emerging markets addresses new techniques in emerging market fund management. In the sixth section, the authors introduce non-traditional types of asset-backed securities (ABS), which offer enhanced yield and well-managed, diversified risk, especially collateralized loan obligations (CLOs) and collateralized bond obligations (CBOs). The seventh section contains three chapters presenting issues on insurance and credit derivatives. Insurance-linked securities and contingent capital are now firmly established and are expected to grow over the next few years, although the current softness of the reinsurance market may limit the number of issues. In the eighth section, credit arbitrage and creditand insurance-linked notes are discussed, as well as a range of new asset structures. The ninth section discusses regulatory environment issues, including marketing alternative investment funds and taxation of hedge funds. The final section contains three appendixes including an executive summary of a 1997 report on alternative Book Review

Mutual Funds Increasing Biotech Investments

Mutual Funds Increasing Biotech Investments

Human Capital and Covenants Not to Compete

Human Capital and Covenants Not to Compete

Aperçu sur les institutions financières internationales, les mouvements de capitaux et les problèmes monétaires au sein du C.A.E.M. (Comecon)

An Insight into the International Financial* Institutions, Capital Circulation and Monetary Problems of the C.M.E.A. The member countries of the C.M.E.A. do not hesitate to make use of the frequent international monetary crises in the Western World to point up the merits of their own system. However, a close examination reveals that the "Socialist Community" itself, is not exempt from monetary difficulties, and ample reference is made to these in the concluding part of Fakiroff's article. In the first part he describes the workings of the international financial institutions in the C.M.E.A. countries, namely, the International Bank for Economic Cooperation and the International Investment Bank. While the first appears as a sort of clearing house for deposits and multilateral compensations, the second is concerned with banking transactions among firms and channeling available resources toward mutual investments. Capital circulation within the C.M.E.A. countries is analyzed in the second part of the article, including the main credit agreements concluded between the USSR and the other members of the group, as well as, agreements between member countries among themselves. The author raises the question whether the USSR is not actually becoming the "net importer" of mutual capital.