Fund selection in target date funds

This study investigates the family-fund strategy in target date funds (TDFs). We find that fund families often create TDFs by bundling existing mutual funds and use TDFs to increase non-performance-related flows to constituent funds that are not competitive. Such incremental non-performance-related flows exceed 1% of total net assets on a monthly basis. We further investigate the potential monitoring effect of plan sponsors by examining the association between the characteristics of constituent funds and their likelihood of staying in the TDFs. We find that constituent funds with lower return performance or younger age exhibit a lower survival probability of continuing as part of a TDF. Therefore, the problem of potential agency cost at the selection point of the constituent funds may be mitigated to some extent after entering TDFs.     

An empirical analysis of the <Emphasis Type="Italic">Wall Street Journal’s</Emphasis> SmartMoney fund screen

We examine mutual funds that appeared in the Wall Street Journal’s SmartMoney Fund Screen column from September 2004 through July 2009. We find that the majority of funds listed do not have Morningstar’s highest five star rating. Regardless of Morningstar rating, the average prepublication performance of the funds is significantly higher than the benchmarks used to measure performance. Post publication, fund performance declines, and the decline is statistically significant across our performance measures. However, additional tests indicate that the SmartMoney funds which have a three or four star rating from Morningstar are better investment values than corresponding five star Morningstar funds with the same prospectus objective and expense ratio.     

The role of mutual funds in the sustainable energy sector

The integration of renewable energy criteria in mutual fund investment decisions could channel private resources into the funding of environmentally related projects implemented by firms contributing to sustainable development. This paper examines the performance of European renewable energy funds that invest globally by comparing their risk‐adjusted returns with those achieved by black energy and conventional mutual funds. It uses Carhart's model on a sample of 81 renewable energy funds, 125 black energy funds, and 4,337 conventional mutual funds. The results indicate that 32.1% of renewable mutual funds—most of which adopt energy producers, renewable energy technology, and energy efficiency‐focused criteria—perform significantly better than the S&P Clean Energy market benchmark, this percentage being affected by the different states of the economy. However, none of them are able to beat the fossil fuel energy (S&P Global 1200 Energy Index) or conventional market benchmarks (S&P Global 1200 Index). Furthermore, 37.04% of renewable energy funds significantly underperform the S&P Global 1200 benchmark. Therefore, the investment in renewable energy funds has a financial cost for investors in relation to conventional fund investors.     

The effect of portfolio weighting on investment performance evaluation: The case of actively managed mutual funds

Among the factors influencing investment performance measurement is the weight dedicated to each security. This paper develops metrics for measuring the extent of equal weighting and value weighting of a portfolio. A sample of 506 actively managed mutual funds shows that funds tend to be equally weighted to a greater degree than they are value weighted, implying that investment performance based solely on a single value-weighted benchmark may not adequately identify excess performance. We propose a two-factor model utilizing both a value-weighted and an equally weighted index and show that the model provides a better fit than the single-index model.(JEL G1)     

DETERMINANTS OF PUBLIC PENSION PLAN INVESTMENT RETURN. The role of fund value maximization and public choice theory

Public pension plans are a major type of institutional owner during the new era of investor capitalism, yet little is known about them. Based upon fund value maximization (FVM) and public choice theory (PCT), we develop hypotheses on the determinants of plan performance as measured by plan annual investment return. FVM espouses that the plan's fund or investment portfolio will be invested to maximize return for a given level of risk, while PCT holds that agency costs are significant in the public sector, and will have a negative effect on plan return. Using biennial pension plan data for 1992–96 for several hundred plans, we found that fund value maximization has a much greater influence on plan performance, but that plan performance is also subject to agency costs associated with public choice theory.     

Mutual fund managers: Does longevity imply expertise?

We analyze the performance of 1,042 mutual funds from 1986 to 1995 to measure the relationship between manager tenure and performance. Funds whose managers' have at least ten years tenure do not generate significantly higher excess returns than funds with less experienced managers. The excess returns of the best managers are not greater than those of their less experienced colleagues. Regardless of tenure, managers producing positive risk adjusted returns for three years are not likely to repeat their performance in subsequent periods. Our results provide further evidence that tenure should not be a factor in selecting mutual funds.     

The impact of the employee-organization relationship on temporary employees' performance and attitude: testing a Singaporean sample

Following the framework proposed by Tsui et al . (1997), this research paper examines the impact of the employee-organization relationship on temporary employees' job performance, turnover intention, overall job satisfaction, affective commitment, perception of fairness and perception of work options. Data were collected from 191 temporary employees from seven employment agencies in Singapore. Analyses conducted revealed that employee responses do vary under the four types of relationship (quasi-spot contract, under-investment, mutual investment and over-investment). In general, both mutual investment and over-investment relationships were associated with higher levels of performance and more favourable attitudes than either the under-investment or quasi-spot contract. Specifically, temporary employees under the mutual investment and over-investment relationships have better job performance, a higher level of affective commitment to the agency, improved overall job satisfaction, higher perception of fairness, higher perception of work options and lower turnover intentions. Furthermore, these finding were obtained even after controlling for the effects of company tenure and job level on employee performance and attitudes. The results highlight the importance of employee-organization relationships in eliciting the desired temporary employee outcomes. Practical implications were drawn for human resource practitioners and employment agencies on how best to manage temporary employees. Some limitations and suggestions for future research were discussed.     

开放式基金和基金家族业绩持续性研究

我国证券投资基金快速发展,从属于同一家基金管理公司的单个基金越来越多,形成基金家族。本文研究从单个基金和基金家族的整体两个层面,采用实证检验方法对其业绩持续性进行研究,研究表明我国开放式基金仅具有短期的业绩持续性,而基金家族的整体业绩不存在持续性,籍此结果提示投资者不应仅仅关注基金的短期业绩,应更多关注基金的长期业绩表现,规避投资中对家族和规模的偏好,关注高价值基金,才能最大程度保障资金安全和自身的利益。     

Making the case for investment in fundraising

Fundraisers frequently find that trustees are reluctant to commit funds to investment in fundraising initiatives, whether this is developing existing fundraising work or investment in new areas. On the other hand, trustees often report that the plans put forward by fundraisers are too vague and do not present the case well enough. Commonly, there is more work to be done on both sides. First, this paper focuses on some of the financial plans that should be developed as part of the case for investment, as this is often the weakest area. The paper then demonstrates how this assists in appraising the risk profile of new initiatives and finally looks at the policy framework needed for decisions to be made. Copyright © 2004 Henry Stewart Publications     

Looking for sustainable development: Socially responsible mutual funds and the low-carbon economy

Sustainable investment responds to demands for carbon and climate-neutral societies. To address the urgency around climate change and provide investors with more qualified information, Morningstar has developed the Low Carbon Designation (LCD) to indicate that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy. The designation is given to portfolios that have low carbon risk and fossil fuel exposure scores. The present study builds on the LCD by examining the relationship between these scores and financial performance. With this aim, we analyze 3920 socially responsible mutual funds from across the world. Results show differences in financial performance according to scores and investment areas. We find evidence that funds considered to have higher levels of sustainability achieved better performance than funds with higher exposure to companies involved in carbon and fossil fuel industries. We provide insights on the informativeness of these new scores with a focus on climate change and their relevance in helping investors to identify climate-aware funds. This study highlights the importance of introducing strategies to develop green finance; the analysis confirms that sustainability improves performance. Finally, the LCD indicator is shown to be relevant for making fairer comparisons among socially responsible funds and, ultimately, for developing low-carbon economies.     

$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans

We identify employees at seven companies whose 401(k) investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty-free 401(k) withdrawals for any reason because they are older than 59?. At the average firm, 36% of match-eligible employees over 59? forego arbitrage profits that average 1.6% of their annual pay, or $507. A survey educating employees about the free lunch they are foregoing raised contribution rates by a statistically insignificant 0.67 percent of income among those completing the survey.     

A comparison of corporate versus government bond funds

We examine four separate classifications (high quality corporate, general corporate, government Treasury, and general government) of investment grade bond funds over the 1994–2009 period. We verify that distinct differences exist in investment styles across the classifications. We also document significant differences in performance as corporate funds outperform government funds by a risk adjusted average of 8 to 53 basis points on an annual basis depending on the model used. The performance differences are not strictly a function of expenses and are robust to alternative evaluation metrics. An examination of cash flows to the funds indicates that investment dollars are driven by the differences in risk adjusted performance.     

基于价格预测能力的基金羊群效应模型与算例分析

本文总结了现有羊群效应实证模型的不足,基于基金价格预测能力,构建了可以更加精确地判断每只基金的投资决策作为一种信号是否会对其他基金投资决策带来影响的实证模型。分析结果显示,大多数基金都能够产生明显的羊群效应。本文在模型建立过程中还提出了新的基金评价思路,为更加细致的羊群效应实证研究方法提供借鉴。     

Principles for sustainability rating of investment funds

During the last decade, the idea of sustainable investments hit the market. Investors both private and institutional started to supplement financial considerations with social and ecological ones. Meanwhile the supply of mutual funds in the ‘green’ investment sector increased enormously. Currently in Europe about 300 mutual funds are available that are managed according to sustainability and social responsibility. Potential investors face the difficulty of keeping track of the various funds and choosing among them based on a reliable comparative assessment. This paper outlines the basic principles and methods on which such a comparative sustainability rating is based. The method was designed to be analogous to rating of the funds financially. The sustainability rating is based on assessment of the research processes in the fund management as well as investigation of the fund portfolio in terms of composition and sustainability performance. It should support investors in their investment choices by offering them a third party view. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.     

Emerging market mutual fund performance: Evidence for Poland

This paper provides evidence on the performance of mutual funds in a prominent emerging market; Poland. Studying an emerging market provides an excellent opportunity to test whether the consensus on the inability of mutual funds in developed and highly efficient markets to beat the market, also holds in less efficient markets. While the weaknesses of legal institutions and underdeveloped capital markets in emerging countries could negatively contribute to performance, a certain level of market inefficiency might also enable fund managers to successfully apply security selection and therefore beat the market. This paper presents an overview of the Polish mutual fund industry and investigates mutual fund performance using a survivorship bias controlled sample of 140 funds. The latter is done using the Carhart (1997) 4-factor asset-pricing model. In addition, we investigate whether Polish fund managers exhibit “hot hands”, persistence in performance. Finally the influence of fund characteristics on risk-adjusted performance is considered. Our overall results suggest that Polish mutual funds on average are not able to add value, as indicated by their negative net alphas. Interestingly, domestic funds outperform internationally investing funds, which points at informational advantages of local over foreign investors. Finally, we detect strong persistence in mean returns up to 1 year. It is striking that “winning” funds are able to significantly beat the market, based on their significantly positive alpha's. These results deviate from studies on developed markets that conclude that even past winners are not able to significantly beat the market.     

Market size and seasonalities: The case of the UK investment trust industry

The particular characteristics of the UK mutual funds industry provide ideal ground for examining the pertinence of the ‘Small-size effect’ and the ‘tax-loss-selling’ hypothesis. The evidence indicates the presence of a modest-size premium for smaller investment trusts, but, rather surprisingly, size in general does not appear to be a determining factor of market performance. Moreover, in spite of some variation in the rates of return around the turn of the tax year, the evidence as a whole does not unambiguously support the tax-loss-selling hypothesis. However, there is ground to believe that the overall poor performance of the UK investment trust industry could be due to the tax regimen governing the industry's operations during the period 1965–80.     

Examining the behavior of renewable‐energy fund investors

Mutual fund investors could contribute to sustainable development by encouraging fund managers to channel their savings into the funding of sustainable energy projects adopted by firms. This study examines whether renewable‐energy investors take into account financial and/or nonfinancial factors when making the decision to invest in a specific fund, comparing their investment behavior with that of black‐energy and conventional investors. To this end, we have gathered information about 4,368 mutual funds (76 renewable‐energy funds, 109 black‐energy funds, and 4,183 conventional mutual funds) from January 2007 to December 2017. For this sample, we adopt a panel‐data approach with Petersen's standard errors clustered by fund and year. Our results indicate that renewable‐energy fund investors are less sensitive to past financial performance than are black‐energy and conventional fund investors, indicating that the former derive their utility from nonfinancial attributes whereas black‐energy investors derive their utility from a conditional multiattribute and conventional fund investors derive their utility from financial attributes.     

Sellers or keepers? Stock retentions in stock option plans

This article examines stock‐holding behaviors among participants in Save As You Earn (SAYE) stock option plans in the United Kingdom. It examines the influences upon the decision to sell or retain stock once options have been exercised, utilizing data from a study of option plan participants in five large U.K. companies. The main findings are that investment portfolios, the reasons for participating in the option plan, and age are important influences on the decision to retain stock. Contrary to expectations, income and risk preferences have little direct influence once other factors are considered. These results have implications for research, corporate practice, and national policy. © 2005 Wiley Periodicals, Inc.