Resumen de Three essays on fund managers’ abilities: learning, autonomy and divergent trading
The development of this doctoral thesis is motivated by the important role of fund managers for the efficiency of mutual fund industry. This doctoral thesis consists of three empirical chapters on several fund managers’ abilities; learning, autonomy, and divergent trading.
In Chapter 1, the learning process in portfolio management is examined in depth, based on the hypothesis that not all management decisions have the same importance in terms of performance. Therefore, they do not all have the same impact on the learning process. Chapter 1 shows a learning process over time in the mutual fund industry, with managers making fewer important errors, driven by a significant number of fund families. This process could have a positive influence on the compensation of managers, and on the overall efficiency of the fund industry.
The evidence found in previous studies on the trend of individual investors to concentrate all their funds in the same fund family leads us to investigate in Chapter 2 its effect on the potential diversification for investors. We explore the portfolio overlap among mutual funds within the same family and across families. We find that investors could improve their diversification level by selecting funds across families given that the portfolio overlap for fund pairs in different families is lower. In addition, this chapter studies the heterogeneity among fund families in terms of portfolio overlap and manager autonomy in portfolio holding allocations. Chapter 2 shows that the level of portfolio overlap among funds is significantly higher in larger families, in families that belong to a banking group, and in families that do not have considerable experience in the mutual fund market. However, the manager autonomy is higher in smaller fund families with wider experience that do not belong to a banking group. Finally, we investigate whether the similarity level among the portfolio holdings of funds and the manager autonomy within a family are key determinants of the performance obtained by individual investors who select this fund family. Chapter 2 indicates that a higher diversification and a higher manager autonomy within families are positive factors for investors’ performance.
The aim of Chapter 3 is to isolate the trading decisions that are distinct regarding those carried out by other funds in order to analyse whether the divergent decisions of fund managers are an important source of added value. In this chapter, we examine the evolution of this phenomenon, and we explore the market conditions and the portfolio characteristics that drive fund managers to trade more divergently. Furthermore, this chapter studies the consequences of this trading divergence on the subsequent fund performance. Chapter 3 shows that the trading divergence level increases significantly over time, especially since the global financial crisis of 2008. This chapter also shows that the fund pairs with a higher previous portfolio overlap show a lower divergence level among their following trading decisions. In addition, we obtain that fund manager trade more divergently with a lower market stress. Finally, in line with the results of Chapter 2, this chapter shows that higher levels of trading divergence result in better fund performance. This result is reinforced when we compare the performance contribution of divergent trading decisions with the convergent trading’s performance contribution, revealing that fund managers generate added value with their divergent trading decisions.
