Captured Money? Differences in the Performance Characteristics of Retail and Institutional Mutual Funds

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Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Captured Money? Differences in the Performance Characteristics of Retail and Institutional Mutual Funds by : Jason J. Karceski

Download or read book Captured Money? Differences in the Performance Characteristics of Retail and Institutional Mutual Funds written by Jason J. Karceski and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the early 1990s, a number of mutual funds have emerged that cater exclusively to institutional investors, i.e. pension funds, trusts and corporate benefit plans. Information on the performance and flows into institutional mutual funds provides a unique opportunity to compare the factors influencing investment decisions of institutional investors to those of individual retail investors. We find that despite significantly lower expenses, on average institutional funds do not outperform retail funds. In addition, investors in institutional funds do not chase returns the same way that retail customers do. One explanation for the lack of any flow performance relationship is that some investors in these funds do not closely monitor the investment decisions made on their behalf by trustees and other institutional money managers. We refer to this as the capture hypothesis. To test the capture hypothesis we split institutional funds based on investor clientele and minimum investment requirements (a proxy for the costs of monitoring). Consistent with the capture hypothesis, we find institutional funds with relatively low investment requirements and funds with retail mates perform worse than other institutional funds both before and after adjusting for risk and expenses. Moreover, while cash flows into institutional funds are less sensitive to fund performance than are flows into retail funds, flows into institutional funds with high investment requirements are significantly more sensitive to risk-adjusted measures of performance than flows into retail funds. This suggests that some institutional investors focus on different performance criteria than retail investors.

Swing Pricing and Fragility in Open-end Mutual Funds

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Publisher : International Monetary Fund
ISBN 13 : 1513519492
Total Pages : 46 pages
Book Rating : 4.5/5 (135 download)

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Book Synopsis Swing Pricing and Fragility in Open-end Mutual Funds by : Dunhong Jin

Download or read book Swing Pricing and Fragility in Open-end Mutual Funds written by Dunhong Jin and published by International Monetary Fund. This book was released on 2019-11-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.

Investment Philosophies

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Publisher : John Wiley & Sons
ISBN 13 : 9780471345039
Total Pages : 518 pages
Book Rating : 4.3/5 (45 download)

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Book Synopsis Investment Philosophies by : Aswath Damodaran

Download or read book Investment Philosophies written by Aswath Damodaran and published by John Wiley & Sons. This book was released on 2003-01-20 with total page 518 pages. Available in PDF, EPUB and Kindle. Book excerpt: Table of contents

Research Handbook on Shareholder Power

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Publisher : Edward Elgar Publishing
ISBN 13 : 1782546855
Total Pages : 638 pages
Book Rating : 4.7/5 (825 download)

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Book Synopsis Research Handbook on Shareholder Power by : Jennifer G. Hill

Download or read book Research Handbook on Shareholder Power written by Jennifer G. Hill and published by Edward Elgar Publishing. This book was released on 2015-07-31 with total page 638 pages. Available in PDF, EPUB and Kindle. Book excerpt: Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Recent shifts in capital market structure require a reassessment of the role and power of shareholders. These original, specially commiss

Performance and Characteristics of Actively Managed Retail Mutual Funds with Diverse Expense Ratios

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Publisher :
ISBN 13 :
Total Pages : 20 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Performance and Characteristics of Actively Managed Retail Mutual Funds with Diverse Expense Ratios by : John A. Haslem

Download or read book Performance and Characteristics of Actively Managed Retail Mutual Funds with Diverse Expense Ratios written by John A. Haslem and published by . This book was released on 2017 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we provide extensive evidence on the performance and characteristics of 1,779 U.S. domestic, actively managed retail equity mutual funds. We find that expense ratios differ widely among Morningstar categories. Overall, our results indicate that funds with low expense ratios outperform those with higher expense ratios. An implication of these findings is that retail investors generally could gain insight into fund expenses and performance prospects relative to peers if research services such as Morningstar, Lipper, and Value Line included each fund's expense ratio standard deviation class in their basic suite of data items.Consistent with previous studies, we find strong evidence that the average actively managed mutual fund fails to outperform its benchmark after expenses. Furthermore, the probability of a fund achieving a positive risk-adjusted return increases as its expense ratio decreases. Similar findings in the past have lead many experts to conclude that investors would be better off in low-cost passively managed index funds. Our results show that expenses must be at least one and perhaps two standard deviations below the peer-group mean for investors to have close to a 50-50 chance of beating a relevant benchmark.We also examine mutual fund characteristics partitioned by expense ratio class. Compared with funds in high and very high expense ratio classes, our major results show that those in low or very low expense ratio classes have significantly lower front-end and deferred loads, 12b-1 fees, management fees, and turnover. An implication of this evidence is that expense conscious investors should look carefully at these fund characteristics before investing.Our study provides evidence that supports links between mutual fund performance and fund attributes. Based on our regression analysis, we find evidence suggesting that larger equity funds tend to outperform smaller equity funds, which may reflect economies of scale. We find a significant negative relation between performance and loads (especially front-end loads), turnover, and beta (specifically using three-year performance measures). In addition, our results indicate no significant relation between performance and 12b-1 fees. We find evidence of statistically significant but mixed performance results for beta, cash, and dividend yields. In general, investors should be aware of these relations before investing.

Comparing Performance Sensitivity of Retail and Institutional Mutual Funds' Investment Flows

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Publisher :
ISBN 13 :
Total Pages : 21 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Comparing Performance Sensitivity of Retail and Institutional Mutual Funds' Investment Flows by : Mieszko Mazur

Download or read book Comparing Performance Sensitivity of Retail and Institutional Mutual Funds' Investment Flows written by Mieszko Mazur and published by . This book was released on 2017 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine and compare the form of the flow-performance relationship for U.S. retail and institutional mutual funds. We provide evidence that the convex form of the flow-performance function documented by previous research characterizes mostly the relationship in the upper region of the performance scale. In contrast, the flow-performance relationship for the low-performance region appears to be concave. Furthermore, we document that the observed convexity is more pronounced for retail funds, while the concavity can be mainly attributed to institutional funds.

Mutual Fund Shareholders

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Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (318 download)

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Book Synopsis Mutual Fund Shareholders by : Gordon J. Alexander

Download or read book Mutual Fund Shareholders written by Gordon J. Alexander and published by . This book was released on 1997 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Investors' Reactions to Manipulation of Performance Measures

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Publisher :
ISBN 13 :
Total Pages : 208 pages
Book Rating : 4.:/5 (953 download)

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Book Synopsis Investors' Reactions to Manipulation of Performance Measures by : Bin Yu

Download or read book Investors' Reactions to Manipulation of Performance Measures written by Bin Yu and published by . This book was released on 2011 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates how manipulation of fund performances affects fund flow in the US open-ended mutual fund industry. The flaws of conventional performance measures (CPMs) enable fund managers to artificially augment fund performance so as to attract more money. By comparing CPMs with manipulation proof performance measures (MPPM) introduced by Goezmann, Ingersoll, Spiegel, and Welch (2007), we verify that manipulation exists in the mutual fund industry. Using U.S. open-ended mutual fund data from 1991 to 2007, we classify the sample into manipulated and un-manipulated funds, and further demonstrate that individual investors, rather than institutional investors, are more prone to being deceived by manipulation behaviors and thus provide more money to manipulated funds. We start in Chapter 2 with the question of the best model for predicting fund flow. Using a US mutual fund sample as empirical evidence, we compare multiple models of predicting expected flow, and find that models considering a variety of regressors (e.g. past performance, fund size, age) outperform the models that only include lagged flow as the explanatory variable. We then generate the expected flow from the best predicting model, which together with total flow would be used when assessing the investors' reactions to manipulation. Chapter 3 examines whether fund performance measures are manipulated. We show that MPPM can help avoid manipulation, and there is a significant performance discrepancy between MPPM and CPMs when compared to the market. Hence we verify that there are performance manipulations in the mutual fund industry. In addition, we find that the manipulated funds are mainly funds with excess returns below the mean, and the manipulation on retail funds and new funds are more significant. Moreover, we find that after the new Morning Star Rating, which applies a similar intuition as MPPM, was popularized in 2002, the manipulations of performance significantly decreased. Given that CPMs can be manipulated, Chapter 4 investigates whether investors are deceived and provide more money to these funds. After controlling for endogeneity between fund flow and performance, we find that the manipulated funds attract significantly more money in comparison with a group of un-manipulated funds. Specifically, we show that in the retail sample, manipulations have a significantly positive effect on flows, whereas the effect is insignificant in the wholesale subsample. -- provided by Candidate.

Performance and Characteristics of Actively Managed Institutional Equity Mutual Funds

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Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Performance and Characteristics of Actively Managed Institutional Equity Mutual Funds by : H. Kent Baker

Download or read book Performance and Characteristics of Actively Managed Institutional Equity Mutual Funds written by H. Kent Baker and published by . This book was released on 2016 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we provide extensive evidence on the performance characteristics of 1,118 U.S. domestic, actively managed institutional equity mutual funds. We measure performance using such measures as three-year Sharpe ratios, Jensen's alphas, and Miller's active alphas as well as annualized Russell Index-adjusted returns over multiple periods (1, 3, 5, 10, 15 years). We relate performance to fund attributes including expense ratio class, net assets, 12b-1 fees dummy, turnover ratio, beta, cash, and dividend yield.We analyze the disparity of expense ratios of actively managed institutional equity mutual funds and find that expense ratios differ widely among Morningstar categories. Consistent with previous mutual fund studies, we find strong evidence that the average actively managed institutional equity mutual fund cannot beat a representative benchmark after expenses.

What Drives the 'Smart-Money' Effect? Evidence from Investors' Money Flow to Mutual Fund Classes

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Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis What Drives the 'Smart-Money' Effect? Evidence from Investors' Money Flow to Mutual Fund Classes by : George J. Jiang

Download or read book What Drives the 'Smart-Money' Effect? Evidence from Investors' Money Flow to Mutual Fund Classes written by George J. Jiang and published by . This book was released on 2016 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: The literature proposes two competing explanations -- the “smart-money” and “persistent-flow” hypotheses -- for the positive relation between mutual fund flow and future fund performance. We examine the flow-performance relation for different classes of U.S. domestic equity mutual funds. Our results show a stronger positive relation for the retail class than for the institutional class. More importantly, the significant relation for the retail class is mainly driven by funds with net outflow. This evidence is inconsistent with the smart-money hypothesis. We further show that retail funds exhibit greater persistence than institutional funds in net outflow. Once we control for expected fund flows, the flow-performance relation is no longer significant. We also perform robustness checks based on international funds and bond funds. The findings are supportive of the persistent-flow explanation.

Investment Flows

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Publisher :
ISBN 13 :
Total Pages : 20 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Investment Flows by : Galla Salganik-Shoshan

Download or read book Investment Flows written by Galla Salganik-Shoshan and published by . This book was released on 2017 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I compare the fund selection criteria used by investors in retail mutual funds with the criteria of investors in institutional mutual funds. I show several differences in investment flow patterns between retail and institutional funds, which are consistent with differences in investor profiles of the two types of fund. More specifically, compared with investors of retail mutual funds, clients of institutional mutual funds use more quantitatively sophisticated criteria such as risk-adjusted return measures and tracking error, demonstrate stronger momentum-driven and herding behaviors, and are less sensitive to fund expense ratio.

The Determinants of Investment Flows

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Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis The Determinants of Investment Flows by : Galla Salganik-Shoshan

Download or read book The Determinants of Investment Flows written by Galla Salganik-Shoshan and published by . This book was released on 2016 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper compares the fund selection criteria used by investors in retail mutual funds with the criteria of investors in institutional mutual funds. I find that, compared with investors of retail mutual funds, clients of institutional mutual funds use more quantitatively sophisticated criteria such as risk-adjusted return measures and tracking error, demonstrate stronger momentum-driven and herding behaviors, and are less sensitive to fund expense ratio. In addition, I provide evidence that the previously-documented convex form of the flow-performance relationship is driven mostly by retail funds.

Performance and Characteristics of Actively Managed Retail Equity Mutual Funds with Diverse Expense Ratios

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Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Performance and Characteristics of Actively Managed Retail Equity Mutual Funds with Diverse Expense Ratios by : John A. Haslem

Download or read book Performance and Characteristics of Actively Managed Retail Equity Mutual Funds with Diverse Expense Ratios written by John A. Haslem and published by . This book was released on 2018 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the relation between the performance and characteristics of 1,779 domestic, actively managed retail equity mutual funds with diverse expense ratios. We show that using expense ratio standard deviation classes is an effective method for characterizing fund expenses for investors. Using various performance measures including Russell-index-adjusted returns, the results indicate that superior performance, on average, occurs among large funds with low expense ratios, low trading activity, and no or low front-end loads. Performance is invariant with respect to whether funds have 12b-1 fees.

Efficiently Inefficient

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Publisher : Princeton University Press
ISBN 13 : 0691196095
Total Pages : 368 pages
Book Rating : 4.6/5 (911 download)

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Book Synopsis Efficiently Inefficient by : Lasse Heje Pedersen

Download or read book Efficiently Inefficient written by Lasse Heje Pedersen and published by Princeton University Press. This book was released on 2019-09-17 with total page 368 pages. Available in PDF, EPUB and Kindle. Book excerpt: Efficiently Inefficient describes the key trading strategies used by hedge funds and demystifies the secret world of active investing. Leading financial economist Lasse Heje Pedersen combines the latest research with real-world examples and interviews with top hedge fund managers to show how certain trading strategies make money--and why they sometimes don't. Pedersen views markets as neither perfectly efficient nor completely inefficient. Rather, they are inefficient enough that money managers can be compensated for their costs through the profits of their trading strategies and efficient enough that the profits after costs do not encourage additional active investing. Understanding how to trade in this efficiently inefficient market provides a new, engaging way to learn finance. Pedersen analyzes how the market price of stocks and bonds can differ from the model price, leading to new perspectives on the relationship between trading results and finance theory. He explores several different areas in depth--fundamental tools for investment management, equity strategies, macro strategies, and arbitrage strategies--and he looks at such diverse topics as portfolio choice, risk management, equity valuation, and yield curve logic. The book's strategies are illuminated further by interviews with leading hedge fund managers: Lee Ainslie, Cliff Asness, Jim Chanos, Ken Griffin, David Harding, John Paulson, Myron Scholes, and George Soros.

Cross Section of Money Market Fund Risks and Financial Crises

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Publisher : DIANE Publishing
ISBN 13 : 1437940013
Total Pages : 63 pages
Book Rating : 4.4/5 (379 download)

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Book Synopsis Cross Section of Money Market Fund Risks and Financial Crises by :

Download or read book Cross Section of Money Market Fund Risks and Financial Crises written by and published by DIANE Publishing. This book was released on 2010 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Hedge Fund Activism

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Publisher : Now Publishers Inc
ISBN 13 : 1601983387
Total Pages : 76 pages
Book Rating : 4.6/5 (19 download)

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Book Synopsis Hedge Fund Activism by : Alon Brav

Download or read book Hedge Fund Activism written by Alon Brav and published by Now Publishers Inc. This book was released on 2010 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism.

2005 Investment Company Fact Book

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Publisher :
ISBN 13 : 9781878731388
Total Pages : 172 pages
Book Rating : 4.7/5 (313 download)

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Book Synopsis 2005 Investment Company Fact Book by :

Download or read book 2005 Investment Company Fact Book written by and published by . This book was released on 2005-05-15 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: