Powerpoint Templates Management structure and the performance of funds of mutual funds Presenter: Chia-Yi Abi Lin Instructor: Dr. Pi-Ying Teresa Hsu Date: January 05, 2011
<ul><li>Bertin, W. J. , & Prather, I. (2009). Management structure and the performance of funds of mutual funds. Journal of Business Research, 62 , 1364-1369. </li></ul>Citation
A mutual fund A fund of funds (FOF) stocks / bonds / securities investment mangers investment mangers investor $3000 investor $3000 investor $3000 investor $3000 investor $3000 good fund bad fund good fund good fund bad fund bad fund bad fund bad fund bad fund good fund good fund good fund investor $3000 investor $3000 investor $3000 investor $3000
1. Diversification - fund companies - managers 2. Management expertise - monitoring - information High expense fees Funds of funds Advantages Disadvantage
Purposes of the study - To analyze the performance and other basic characteristics of FOFs - To analyze the impact of diversification, management expertise and expenses on FOFs’ performance
Literature Review X To analyze FOFs Contribute to the existing literature by comparing FOFs’ performance 1. Provide a systematic approach for selecting the best FOFs 2.
Methodology Data collection Morningstar Principia Mutual Funds Advanced (MS) database From 1996 to 2003 Jensen’s alpha and Sharpe ratio
Methodology Large and Small capitalization stock indexes a foreign stock index a bond index Jensen’s alpha Sharpe ratio
smaller FOFs hold more funds that invest in smaller companies than the other two equity groups. Results Table 1 ： Descriptive Statistics Fund of funds Equity funds Equity fund subset Cost structure Performance Portfolio characteristics
On average neither group outperforms the overall market. FOFs outperforms the equity funds subset. Results Table 2 ： To analyze the performance between FOFs and Equity Fund Subset
This finding indicates enhanced performance for both of them will provide more diversification. Results Table 3 ： To analyze management structure on FOFs’ performance
It is significant indicating the desirability of FOFs that invest in-family. Results Table 4 ： To analyze fund company diversification on FOFs performance
In-family FOFs Out-of-family FOFs In-family investment decisions are more important in determining FOFs’ performance. Unidentified team management structures exhibit the worse performance. Results Table 5 ： To compare in-family v.s. out-of-family and management structure
Those FOFs investing in-family are the preferred choice. Results Table 6 ： To compare between FOFs and the equity fund subset
Conclusions FOFs with individual or identified team managers outperform their unidentified team-managed counterparts. Selecting FOFs that invest in-family by a systematic approach, as this leads to superior performance.
Reflections Details of the test statistical analysis are not clear. The paper sheds new light on whether FOFs’ popularity is justified.