Customer satisfaction with socially responsible investing initiatives: The influence of perceived financial and non-financial quality

During the last decade, socially responsible investment (SRI) initiatives have grown to become a mainstream financial service in many countries. However, to date, only a few studies focus on understanding the final investor of such initiatives. This article focuses on one particularly overlooked aspect of SRI behavior; that of customer post-purchase satisfaction. A theoretical model of satisfaction with SRI-profiled mutual funds is developed and tested. The results indicate that perceived financial performance of the SRI-profiled mutual fund is the most important predictor of customer satisfaction. However, perceived environmental, social and governance (ESG) performance also had a positive impact on satisfaction for the SRI mutual fund. On the basis of these results, it is argued that although ESG quality is important to customers, marketers of SRI initiatives should primarily focus on the conventional quality attributes such as financial performance, as a good ESG record alone is unlikely to generate customer satisfaction.     

The company you keep: Investment adviser clientele and mutual fund performance✰

This study examines how the composition of an investment adviser's client base (identified via Form ADV filings) relates to the performance of its mutual funds. Investment advisers catering to institutional clients realize statistically and economically superior risk-adjusted mutual fund performance relative to retail-oriented advisers. Subsequent tests identify the channel(s) responsible for the relationship. The evidence is consistent with both a governance mechanism (i.e., Evans and Fahlenbrach 2012) as well as inefficiencies stemming from the costly search mechanism of Gârleanu and Pedersen's (2018) model for asset management. The results suggest that institutional clients can identify better performing investment managers, particularly in market segments where retail mutual fund investors face higher search costs.     

An exploration of call centre agents' CRM software use,customer orientation and job performance in the customer relationship maintenance phase

Exploratory research techniques are used to examine the relationships between call centre agents' customer relationship management (CRM) software use, agents' customer orientation, and agents' job performance in the maintenance phase of customer relationships. Maintenance activities, which focus on customer retention and cross- and up-selling, are important to study because prior research suggests they have the strongest effect on company performance. In the financial services industry, CRM software applications supporting retention and cross-/up-selling activities benefit firms by raising revenues and reducing costs. The context for this exploratory research is that of in-bound customer service and sales call centres at three different financial institutions. Based on the analysis of data from key informants across these different contexts, this research suggests that CRM software use is a separate antecedent of call centre agent job performance and has a minimal relationship with customer orientation. Given the suggestive nature of exploratory research results, further research is warranted.     

Taxes and the growth in mutual funds: Evidence from OBRA 93

In recent years, individuals have steadily moved from direct ownership of equities to holding securities through mutual funds. Prior research has attributed this phenomenon to tax incentives to hold mutual funds in tax-preferred retirement accounts. In contrast, employing household-level microdata and using OBRA 93 as a quasi-natural experimental setting, we find that on average, investors reduced their mutual fund holdings within tax-preferred accounts following a tax rate increase. However, we also observe that this effect is primarily driven by investors with relatively high trading activity within their tax-preferred accounts; investors exhibiting relatively low trading activity generally increased their mutual fund investments in these accounts after OBRA 93. Investors who increased their mutual fund holdings did not do so by rebalancing away from other asset classes. Collectively, our results suggest that taxes are not driving the growth in mutual funds. This finding has important public policy implications because of the growing popularity of using mutual funds as a retirement savings vehicle, the dwindling number of individuals covered by defined benefit plans, the dramatic increase in the importance of mutual funds as a financial intermediary, and the continued state of flux in U.S. tax policy.     

The ABCs of mutual funds: On the introduction of multiple share classes

We study a significant innovation with widespread consequences for the mutual fund industry: the introduction of multiple-class funds that give investors a choice among alternative load and fee structures. The transition to a multiple-class structure represents an important step in the evolution of the mutual fund industry. It also provides a well-controlled setting for research on the structure of funds, on investor clienteles and their impact on fund performance and, more generally, about the manner in which financial innovations tend to be adopted. We develop a simple model of a fund's decision on whether and when to introduce new classes and empirically investigate the model's predictions that: (a) Funds with more skilled management, less sensitivity of flows to performance, smaller size, higher existing loads and membership in larger families are better positioned to benefit and, therefore, more likely to switch to a multiple-class structure earlier; (b) The new classes increase the level and volatility of fund inflow by attracting investors with short and uncertain investment horizons – which, in turn, can negatively impact fund performance. Our empirical results are generally supportive of the model's predictions.     

Students' Perceptions of a Scaffolded Approach to Learning Financial Planning: An Empirical Study

In the aftermath of the global financial crisis (GFC), one understandable area of scrutiny and pressure for reform is the educational background and professionalism of personal financial advisers. This Australian study reports on a three-year investigation into students' perceptions of ‘scaffolded’ instruction in financial planning. The scaffolded approach was used to assist learning in areas that previously had caused difficulty. The results indicate that students perceived the scaffolded tasks to be valuable learning experiences which increased their appreciation of the skills and knowledge required by financial advisers. Although students may bring different frames of reference to their learning, and the positiveness of perceived value of scaffolded instruction may vary between different demographic groupings, scaffolding techniques are shown to provide strong potential to assist university educators and their students in financial planning.     

Persistent performance in the mutual fund market: Tests with funds and investment advisers

Recent studies of mutual funds have concluded that there is some evidence of superior performance. We test for the existence of superior performance and its persistence with mutual funds and mutual fund investment advisers on a data set of monthly returns from 1979 to 1989 for 1,387 mutual funds grouped by 243 advisers. We find no evidence of superior performance or its persistence but we do find significant evidence of persistence of inferior performance. Consistent with previous studies our findings depend on the benchmark chosen, with multiple benchmarks producing a larger degree of inferior performance.     

MUTUAL FUND BROKERAGE COMMISSIONS

The brokerage commissions paid for portfolio transactions by a large sample of equity mutual funds are investigated. Median brokerage commissions measured as a percentage of net assets are 21 basis points per year with a standard deviation of 27 basis points. The commission levels are negatively correlated with fund size and positively correlated with fund turnover and expense ratio. The average brokerage commission measured as a percentage of assets traded exceeds the typical execution-only commissions for large institutional traders. This finding is consistent with many mutual fund brokerage commissions including payments for research, so-called soft dollar payments. Funds' expense ratios are positively correlated with commissions per trade, inconsistent with the idea that mutual fund managers who pay soft dollars for research have a corresponding reduction in management fees.     

Analyst forecasts and European mutual fund trading

This paper addresses the questions whether European mutual fund managers rely on sell-side analyst information and whether this behavior impacts fund performance. Results show that mutual funds significantly increase (decrease) their holdings in stocks when any of the consensus forecast measures increases (decreases) within the quarter prior to the observation period. Furthermore, mutual fund managers primarily attribute high information value to consensus forecast revisions that contain positive information, that are based on a sufficiently high number of inputs, and with more unanimous inputs to the consensus. Finally, following sell-side research seems to be beneficial for mutual fund managers since our results show that stock trades that are in line with analyst forecast revisions significantly outperform trades that are contrary to analyst research.     

The benefits of option use by mutual funds

Based on comprehensive regulatory data on equity mutual fund option use from the SEC's N-SAR filings, we are the first to present consistent evidence that equity funds' option use generates higher risk-adjusted performance. We further show that this is a direct effect of option use and not an indirect effect of other fund characteristics. Option use also directly results in lower systematic risk, as funds show significantly lower market betas during periods of options usage. Finally, mutual funds use options mainly for hedging as they primarily use protective puts and covered calls. These results are independent of known phenomena, such as the low beta anomaly, and robust to tests for endogeneity and a novel 5-factor model including an investable option strategy factor (IOS). Overall, our findings show that mutual fund option use is beneficial to investors and does not pose risk to the financial system as feared by the SEC. Our results are thus important for investors as well as regulators.     

全球基础设施投资基金研究：投资者偏好和委托代理问题

基于2005年1月至2019年6月间公开发售的2246支来自全球的基建基金数据,本文研究基建基金投资者偏好和委托代理问题。研究结果表明:投资者偏好客户忠诚度较高、投资于国际市场、团队管理型的基建基金;在基建基金公司层面,投资者存在跟风投资行为,且随着信息不透明度和收益不确定性加剧;投资者与基金管理人存在委托代理问题,体现为基金费率与预期业绩不匹配。该现象源于基金管理人利用投资者较高的预期收益设置费率,可以由基金特征因素和年份效应解释,尤其是投资于国际市场、收益分配或非团队管理等特征。本文结论对创新基础设施融资模式、稳定资金来源和微观审慎监管具有重要借鉴意义。     

Coskewness timing ability in the mutual fund industry

The ability of mutual fund managers to time coskewness successfully can help them manage their portfolio’s exposure to potential losses and improve their fund’s performance. This study assesses whether mutual fund managers are able to manage the market exposure of their investment portfolios given a change in coskewness. We demonstrate that fund managers investing in Small Blend and Small Growth stocks possess the ability to time coskewness. On average, the fund managers of these two investment objectives increase the market exposures of their portfolios about 2.749 % and 1.340 %, respectively, based on their anticipations on future coskewness. Superiority is driven from the fact that the fund managers in small capitalization stocks are successfully able to manage the tail risk of their funds’ portfolios. The fund-by-fund results confirm that the number of individual funds succeeding in timing market skewness of the Small Blend and Small Growth investment objectives is larger than the remaining types. The main findings are robust when controlling for other types of timing ability, the periods of financial turbulence, and the construction of coskewness.     

Banks: Advisers or sellers of mortgage loans?

The financial sector has undergone major changes in recent years. From being sharply divided between various sub-sectors, financial activities within banking, insurance and mortgage credit have become increasingly integrated. Two different trends have emerged in this process: One of them is the conglomerate strategy in which the various sub-sectors are linked through joint ownership offering the customers all financial products in-house. The other trend is the focus strategy in which the financial institution sticks to its core business but offers its customers complementary products sourced from other financial institutions. This paper presents an analysis of the conglomerate strategy versus the focus strategy. A questionnaire sent to Denmark's largest companies reveals that the choice of bank and mortgage credit institution is not based on independent decisions. The paper raises the question of whether the financial service businesses are able successfully to balance their functions as sellers and advisers to the customer.     

AGENCY CONFLICTS IN DELEGATED PORTFOLIO MANAGEMENT: EVIDENCE FROM NAMESAKE MUTUAL FUNDS

Namesake funds provide a unique sample for studying the two agency conflicts that exist within a mutual fund. The first is between the fund management company and fund shareholders, and the second is between the fund management company and the fund manager. A typical namesake fund manager sits on his or her fund's board, frequently as the chairman, is the majority owner of the fund management company, and has significant investments in the fund he or she manages. Our results indicate that namesake funds charge higher fees, suggesting that the boards of namesake funds are less effective. We find that namesake funds are more tax efficient, consistent with the idea that managerial ownership helps align the interests of managers with those of shareholders. Because of fewer career concerns, namesake fund managers herd less while assuming greater unsystematic risk. We find weak evidence that namesake fund managers outperform their benchmarks and peers. Finally, we observe that namesake funds attract higher levels of investor cash flow.     

Fee Speech: Signaling, Risk-Sharing, and the Impact of Fee Structures on Investor Welfare

The fee structure used to compensate investment advisers iscentral to the study of fund design, and affects investor welfarein at least three ways: (i) by influencing the portfolio-selectionincentives of the adviser, (ii) by affecting risk-sharing betweenadviser and investor, and (iii) through its use as a signalof quality by superior investment advisers. In this paper, wedescribe a model in which all of these features are present,and use it to compare two popular and contrasting forms of feecontracts, the "fulcrum " and the "incentive " types, from thestandpoint of investor welfare. While the former has some undeniablyattractive features (that have, in particular, been used byregulators to justify its mandatory use in a mutual fund context),we find surprisingly that it is the latter that is often moreattractive from the standpoint of investor welfare. Our modelis a flexible one; our conclusions are shown to be robust tomany extensions of interest. The results are also extended toconsider unrestricted fee structures and competitive marketsfor fund managers.     

Optimal Number of Stock Holdings in Mutual Fund Portfolios Based on Market Performance

Among the decisions that most mutual fund portfolio managers make is the number of stocks to hold. We posit that there is an optimal number of stocks for each mutual fund, reflecting the trade‐off between diversification benefits versus transactions and monitoring costs. We find a significant quadratic relation between number of stock holdings and risk‐adjusted returns for U.S. equity mutual fund portfolios during 1992–2000. Moreover, we find that changes in the number of stocks held over time are more highly correlated with mutual fund flows than with funds' investment returns.     

Explaining the size of the mutual fund industry around the world

This paper studies the mutual fund industry in 56 countries and examines where this financial innovation has flourished. The fund industry is larger in countries with stronger rules, laws, and regulations, and specifically where mutual fund investors’ rights are better protected. The industry is also larger in countries with wealthier and more educated populations, where the industry is older, trading costs are lower and in which defined contribution pension plans are more prevalent. The industry is smaller in countries where barriers to entry are higher. These results indicate that laws and regulations, supply-side and demand-side factors simultaneously affect the size of the fund industry.     

Explaining persistence in mutual fund performance

This study investigates the determinants of persistence in mutual fund performance. Previous research that uses factor-mimicking portfolios and characteristic benchmarks to model fund performance fails to explain all the persistence in fund returns. This study employs a model that directly relates mutual fund returns to the characteristics of the stocks held by funds. Adjusting fund returns for the size of the stocks in which funds invest and financial ratios intended to capture fund manager investment styles explains all the persistence in mutual fund returns from 1976–1985, the period in which persistence is most prevalent.     

Do Focused Funds Offer Superior Performance in an Emerging Market? Evidence from Taiwan's Stock Market

We examine the effects of the number of stock holdings and industry concentration on Taiwan's equity fund performance. The quadratic regression model is applied to explore the optimal number of stock holdings for mutual funds. The empirical results suggest that funds with a smaller number of stock holdings and with a higher level of industry concentration achieve better performance. We also find that mutual fund performance and the number of stock holdings have an inverted U-shaped relationship, and funds that hold twenty-four to twenty-eight stocks can generate superior performance.     

Share of wallet's role in customer profitability

Understanding the financial contribution customers make to their organisations is an initial step in customer relationship management. Set in the banking industry, this paper examines the strength of ‘share of wallet’ as a proxy variable for measuring customer profitability. Data from a study of 1,100 personal retail banking customers of a New Zealand regional bank were used in combination with the bank's own customer contribution data for each of those respondents. Results indicate that although share of wallet might be used as a proxy for customer contribution at a macro level of customer classification, details of specific financial relationships customers have with their main bank are still necessary. Nevertheless, share of wallet ought to become a standard entry in a bank's customer database.