Allocation of Decision Rights and the Investment Strategy of Mutual Funds PDF Download
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Author: Nishant Dass
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
The literature suggests that while decentralized decision-making can allow for greater specialization in an organization, it heightens the cost of coordinating decisions. The mutual fund industry - in particular, sole- and team-managed balanced funds - provides an ideal setting to test the specialization vs. coordination trade-off, since information on decision structures and fund actions is easily obtained. We document that sole-managed balanced funds, with centralized decision rights, exhibit significant market timing that requires reallocation across asset classes. However, consistent with coordination difficulties between managers specializing in particular asset classes, there is no market-timing evident in team-managed balanced funds. Team-managed funds exhibit greater returns from specialization, in the form of better security-selection performance than sole-managed funds. These results hold cross-sectionally and for funds that switch management structures. The overall returns across different management structures are similar, indicating a market equilibrium. Investor flows reward market-timing performance for sole- but not team-managed funds.
Author: Nishant Dass
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
Get Book Here
Book Description
The literature suggests that while decentralized decision-making can allow for greater specialization in an organization, it heightens the cost of coordinating decisions. The mutual fund industry - in particular, sole- and team-managed balanced funds - provides an ideal setting to test the specialization vs. coordination trade-off, since information on decision structures and fund actions is easily obtained. We document that sole-managed balanced funds, with centralized decision rights, exhibit significant market timing that requires reallocation across asset classes. However, consistent with coordination difficulties between managers specializing in particular asset classes, there is no market-timing evident in team-managed balanced funds. Team-managed funds exhibit greater returns from specialization, in the form of better security-selection performance than sole-managed funds. These results hold cross-sectionally and for funds that switch management structures. The overall returns across different management structures are similar, indicating a market equilibrium. Investor flows reward market-timing performance for sole- but not team-managed funds.
Author: George D. Cashman
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
Mutual fund advisors make portfolio decisions for their funds on a daily basis. We examine the location of those portfolio decision rights on two dimensions. First, we consider the geographic location of the decision rights. Second, we consider whether the decision rights remain with an advisor or are outsourced to an independent sub-advisor. We argue that the allocation of portfolio decision rights involves a tradeoff between the opportunity cost of not matching decision rights with specific knowledge, and the agency costs associated with moving the decision rights to the specific knowledge. Patterns in the location of decision rights are consistent with that tradeoff being a meaningful determinant of the allocation of decision rights in the mutual fund industry. Additionally (and consistent with equilibrium), we find that risk-adjusted returns to sub-advised funds are greater than they would have been had the funds not been sub-advised, but indistinguishable from the returns produced by other funds.
Author: Söhnke M. Bartram
Publisher: CFA Institute Research Foundation
ISBN: 195292703X
Category : Business & Economics
Languages : en
Pages : 95
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Book Description
Artificial intelligence (AI) has grown in presence in asset management and has revolutionized the sector in many ways. It has improved portfolio management, trading, and risk management practices by increasing efficiency, accuracy, and compliance. In particular, AI techniques help construct portfolios based on more accurate risk and return forecasts and more complex constraints. Trading algorithms use AI to devise novel trading signals and execute trades with lower transaction costs. AI also improves risk modeling and forecasting by generating insights from new data sources. Finally, robo-advisors owe a large part of their success to AI techniques. Yet the use of AI can also create new risks and challenges, such as those resulting from model opacity, complexity, and reliance on data integrity.
Author: Reena Aggarwal
Publisher: World Bank Publications
ISBN:
Category : Foreign exchange
Languages : en
Pages : 47
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Book Description
Author: Jeffery V. Bailey
Publisher:
ISBN: 9781934667330
Category : Investments
Languages : en
Pages : 107
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Book Description
Author: United States. Securities and Exchange Commission
Publisher:
ISBN:
Category : Mutual funds
Languages : en
Pages : 974
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Book Description
Author: Vasant Naik
Publisher: CFA Institute Research Foundation
ISBN: 1944960155
Category : Business & Economics
Languages : en
Pages : 192
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Book Description
Author: Wendell Scott Simon
Publisher:
ISBN: 9780966117271
Category : Mutual funds
Languages : en
Pages : 0
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Book Description
Author: Pedro Matos
Publisher: CFA Institute Research Foundation
ISBN: 1944960988
Category : Business & Economics
Languages : en
Pages : 80
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Book Description
This survey examines the vibrant academic literature on environmental, social, and governance (ESG) investing. While there is no consensus on the exact list of ESG issues, responsible investors increasingly assess stocks in their portfolios based on nonfinancial data on environmental impact (e.g., carbon emissions), social impact (e.g., employee satisfaction), and governance attributes (e.g., board structure). The objective is to reduce exposure to investments that pose greater ESG risks or to influence companies to become more sustainable. One active area of research at present involves assessing portfolio risk exposure to climate change. This literature review focuses on institutional investors, which have grown in importance such that they have now become the largest holders of shares in public companies globally. Historically, institutional investors tended to concentrate their ESG efforts mostly on corporate governance (the “G” in ESG). These efforts included seeking to eliminate provisions that restrict shareholder rights and enhance managerial power, such as staggered boards, supermajority rules, golden parachutes, and poison pills. Highlights from this section: · There is no consensus on the exact list of ESG issues and their materiality. · The ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” · Investors should be positioning themselves for increased regulation, with the regulatory agenda being more ambitious in the European Union than in the United States. Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals. CFA Institute provides an exemplary case in its Future of Finance series (www.cfainstitute.org/research/future-finance). For the academic community, I suggest we ramp up research aimed at tackling some of the open questions around the pressing societal goals of ESG investing. I am optimistic that practitioners and academics will identify meaningful ways to better harness the power of global financial markets for addressing the pressing ESG issues facing our society.
Author: Richard Bernstein
Publisher: John Wiley & Sons
ISBN: 0471735922
Category : Business & Economics
Languages : en
Pages : 273
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Book Description
Transform today's surplus of investment information into a high-level investment strategy In an investment climate characterized by rapidly increasing access to information, it has become a real problem to sort out the legitimate financial advice, grounded in traditional analysis, from the constant stream of useless information, or "noise." Such "noise", through technological advances such as the Internet, has become widespread. This overload of information is hurting investors, since it makes real analysis based on factual inference harder to come by. This book steers investors through the "noise" to show them where and how to find solid investment information. This step-by-step guide is based on a very popular presentation the author makes to new private clients at Merrill Lynch. Richard Bernstein (New York, NY) is First Vice President and Chief Quantitative Strategist at Merrill Lynch & Company. Prior to joining Merrill Lynch, he worked for E. F. Hutton and Tucker Anthony. He has been voted to the Institutional Investor All-America Research Team in each of the last eight years, and has appeared on Wall Street Week with Louis Rukeyser.
