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Security Concentration and Fund Performance *
Author(s) -
Sohn Pando,
Kim Sungsin,
Shin Jungsoon
Publication year - 2011
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/j.2041-6156.2010.01035.x
Subject(s) - business , diversification (marketing strategy) , income fund , open end fund , fund of funds , target date fund , fund administration , sovereign wealth fund , manager of managers fund , investment fund , closed end fund , finance , equity (law) , market liquidity , economics , institutional investor , marketing , microeconomics , corporate governance , political science , law , incentive
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.