Security concentration and fund performance

Pando Sohn; Sungsin Kim; Jungsoon Shin

doi:10.1111/j.2041-6156.2010.01035.x

Security concentration and fund performance

Pando Sohn, Sungsin Kim, Jungsoon Shin

Division of Business Administration

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

We examine focused funds from 2002 to 2008 to see whether they offer superior performance to Korean equity funds without survivorship bias. Prior studies show that fund managers might allocate their funds to specific industries or focused securities to achieve superior performance. However, after controlling for various fund characteristics and using several alternative measures, our results show that fund performance has a positive relation to diversification. Furthermore, we identify that the underperformance of focused funds is due to liquidity problems, idiosyncratic risk, and trade performance. Our findings have important implications for the investment strategies of fund managers and fund industries.

Original language	English
Pages (from-to)	109-137
Number of pages	29
Journal	Asia-Pacific Journal of Financial Studies
Volume	40
Issue number	1
DOIs	https://doi.org/10.1111/j.2041-6156.2010.01035.x
State	Published - Feb 2011

Keywords

DGTW measure
Diversified fund
Focused fund
Fund performance
Portfolio concentration
Security concentration

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10.1111/j.2041-6156.2010.01035.x

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AB - We examine focused funds from 2002 to 2008 to see whether they offer superior performance to Korean equity funds without survivorship bias. Prior studies show that fund managers might allocate their funds to specific industries or focused securities to achieve superior performance. However, after controlling for various fund characteristics and using several alternative measures, our results show that fund performance has a positive relation to diversification. Furthermore, we identify that the underperformance of focused funds is due to liquidity problems, idiosyncratic risk, and trade performance. Our findings have important implications for the investment strategies of fund managers and fund industries.

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KW - Diversified fund

KW - Focused fund

KW - Fund performance

KW - Portfolio concentration

KW - Security concentration

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Security concentration and fund performance

Abstract

Keywords

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