Fund manager characteristics and performance

Abstract

This study establishes a multitier framework to evaluate how fund manager characteristics systematically affect mutual fund performance. The framework includes three tiers of performance elements: comprehensive performance; return and risk; and timing skill and picking ability. Using performance decomposition, our evidence indicates that various characteristics take distinct channels to influence return, risk and fund manager abilities, which in turn affect comprehensive performance. In particular, having a degree of Master of Business Administration or a Chartered Financial Analyst qualification is significantly associated with a fund manager's better stock-picking ability, higher excess returns and better comprehensive performance.

Keywords:

• excess return
• fund manager characteristics
• market timing skill
• mutual fund performance
• Sharpe ratio
• stock-picking ability
• total risk

ORCID

Yi Fang http://orcid.org/0000-0002-7264-7327

Notes

1. The advent and evolution of the stock markets of developed countries are mainly induced by market forces. However, the creation of the Chinese stock market is highly regulated by central and local authorities. Chinese authorities have continuous effects on the development of the Chinese stock market.

2. For example, Anthony Bolton, one of the UK's best-known investment fund managers and most successful investors, achieved a record 20% return compounded annually in the European and North American markets, but lost 15% in 2010 and 30% in the first three quarters of 2011 in the Chinese market.

3. In particular, this theory argues that men are inclined to take more risks because it is a socially instilled belief that risk-taking is a highly valued masculine tendency.

Additional information

Funding

The authors gratefully acknowledge the financial support of the National Natural Science Foundation of China [grant numbers 71371084 and 71001044], of the Postdoctoral Science Foundation of Jilin Province [grant number RB201370] and of the Liberal Arts and Professional Studies International Collaboration Grant at York University.