Determinants of Portfolio Turnover for Equity Mutual Funds

Active management of a mutual fund aims to obtain a better return than a representative market portfolio, by means of regularly adjusting the composition of the fund’s portfolio of securities. This study investigates the determinants of the portfolio turnover indexes of actively managed stock investment funds in the Brazilian market. By applying the method developed by Gaspar, Massa and Matos (2005), we show how the characteristics of funds and their managers affect their level of portfolio turnover. Large funds and those that require high initial deposits tend to present higher turnover, as is the case of funds having longer manager tenure. In contrast, the longer the manager’s experience is, the lower the turnover tends to be. Finally, managers with business administration degrees tend to be more active traders than those trained in economics or engineering.