Mutual fund families and financial crisis: an investigation towards family characteristics and performance

Sun, Zhen (2012). Mutual fund families and financial crisis: an investigation towards family characteristics and performance Honours Thesis, UQ Business School, The University of Queensland.

       
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Author Sun, Zhen
Thesis Title Mutual fund families and financial crisis: an investigation towards family characteristics and performance
School, Centre or Institute UQ Business School
Institution The University of Queensland
Publication date 2012-10-01
Thesis type Honours Thesis
Supervisor Karen Benson
Total pages 110
Language eng
Subjects 1502 Banking, Finance and Investment
Formatted abstract
This thesis examines the relation between fund family characteristics and family performance. Four family characteristics are incorporated: economies of scale, cross fund subsidization, spillover effect and the co-insurance effect. The impact of these characteristics on family return is assessed for small and large families and during financial crisis versus non-financial crisis periods. The motivation of this study is to provide guidance for fund families to develop resource allocation strategies. Results show family characteristics do impact on family risk adjusted return. During a financial crisis period, small fund families significantly outperform large fund families by 6.81% on a monthly basis by implementing a cross fund subsidization strategy. Moreover, a small fund family will generate a return of 0.29% per month by allocating more managers toward star funds during a crisis period; this impact varies across fund family size and differs between financial crises with non-crisis period. We also find that spillover effect is acting as an accelerator in terms of speeding up within family resource transfer, usually acting in one direction from poor performing funds toward top performing funds.

The co-insurance effect, derived from holding Affiliated Fund of Mutual Funds (AFoMFs), is further analysed to determine the relation with risk. Holding the same level of cash, AFoMFs families will be significantly better off by diversifying family risk in financial crisis and non-crisis period. In addition, there is insufficient evidence suggest that AFoMFs significantly impact on fund exit decisions.

These results have important implications for fund families to set strategies to enhance family performance.

 
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Created: Sat, 22 Dec 2012, 00:46:15 EST by Karen Morgan on behalf of UQ Business School