The empirical literature on investment performance suggests that only hedge funds among institutional investors have delivered consistent superior performance. We examine whether this stylized fact ...holds when we narrow focus to long-equity holdings. In our sample period of 1997–2006, the long-equity holdings of hedge funds can generate a significant excess return (gross alpha) of 4.1 % per year, which contrasts with modest gross alphas of 0.3–1.8 % per year for other six classes of institutional investors. Given realistic execution and overhead costs, only hedge funds are likely to realize net excess returns from equity picking. Among small hedge funds, those with high churn rate show significant positive alphas but those with low churn rates don’t. Greatest superiority is associated with hedge funds with both high churn rate and high deviation from benchmark weights (high active share). Compared to other institutional investors, hedge funds load negatively on an illiquidity factor, which coheres with their higher churn since the latter would imply burdensome trading costs if executed with illiquid stocks. Hedge funds, uniquely among institutional investors, display superior timing of their loading on the market risk factor, and their superior stock-picking alpha persists across the three eras in our sample period.
RESUMEN La creación de fondos de inversión inmobiliaria en Colombia ha abierto posibilidades de diversificación de portafolio a agentes que deseen invertir en el sector inmobiliario sin tener que ...comprar y administrar finca raíz de forma directa. El comportamiento de estos fondos ha mostrado una rentabilidad promedio superior y una volatilidad menor que la del mercado durante los últimos años. Este artículo aplica el modelo de valoración de activos de capital (CAPM) y estima varios modelos autorregresivos y de heterocedasticidad condicional, con el fin de calcular el beta de estos fondos como una aproximación a la sensibilidad al riesgo sistemático del sector inmobiliario. Los resultados de las estimaciones muestran que el nivel de riesgo del sector inmobiliario se encuentra muy por debajo del riesgo de mercado, lo cual sugiere que los proyectos inmobiliarios tienen un costo de capital mucho menor que el de determinados proyectos en otros sectores.***The creation of property investment funds in Colombia has made portfolio diversification possible by allowing parties to invest in the property sector without buying and managing real estate directly. In recent years, the behavior of these funds has shown higher average profits and lower volatility than that of the market. This study applies the Capital Asset Pricing Model (CAPM) and estimates various autoregressive models and models of conditional heteroscedasticity, in order to calculate the beta of these funds as an estimate of the property sector’s sensitivity to systematic risk. Results show that the risk level of the property sector is far lower than that of the market, suggesting that real estate projects have much lower capital costs than projects in other sectors.
Zusammenfassung
Die jüngste aus der nationalen Umsetzung der Alternativen Investment Fondsmanager-Richtlinie (AIFM-Richtlinie) der Europäischen Union in Deutschland hervorgehende ...Kapitalmarktregulierung sieht neue Informationspflichten für geschlossene Publikumsfonds vor. Allerdings erlauben diese aufgrund fehlender Operationalisierungsvorgaben nur bedingt eine transparente, verständliche und standardisierte Aufbereitung finanzwirtschaftlicher Informationen für private Investoren. Der vorliegende Beitrag stellt unter Berücksichtigung der neuen Publizitätsvorgaben des Kapitalanlagegesetzbuches (KAGB) bzw. geplanter Vorgaben des Instituts der Wirtschaftsprüfer (IDW) sowie bestehender finanzwirtschaftlicher Methoden eine Bewertungssystematik für geschlossene Publikumsfonds vor, die zu mehr Produkttransparenz und einer besseren Vergleichbarkeit führen kann. Die Anwendung der vorgeschlagenen Bewertungssystematik wird hierbei unter Zugrundelegung realer Fondsdaten aufgezeigt.
Development of a Valuation System for Closed-Ended Alternative Investment Funds in Sales Prospectuses and Performance Reports
Abstract
The recent implementation of the European Alternative Investment Funds Managers Directive (AIFMD) into German law contains new information regulations for closed-ended alternative investment funds (AIF) in order to protect private investors. However, they hardly address a comprehensive presentation of financial product information due to the existing lack of operationalizing standards. Considering the new regulation of the German Capital Investment Statute Book (Kapitalanlagegesetzbuch - KAGB) and future standards of the German Institute of Auditors (IDW), this paper suggests a new valuation system for closed-ended AIFs for private investors based on cash flows and well-established finance methods. Thereby, the objective is to accomplish a higher level of product transparency and comparability. Using a data sample of real closed-ended AIFs, standards for the design of the financial information that has to be published to capital markets by emission houses are provided.
JEL Classification: M48, G23, G32
Recent regulatory changes have brought a renewed focus on the impact of investment expenses on investors' financial well-being. The author offers methods for calculating relative terminal wealth ...levels for those investing in funds with different expense ratios. Under plausible conditions, a person saving for retirement who chooses low-cost investments could have a standard of living throughout retirement more than 20% higher than that of a comparable investor in high-cost investments.
We develop a theoretical framework for defensive and strategic restructuring, and provide estimates of restructuring in privatized firms in an advanced transition economy: Slovenia. Our rich data ...point to both types of restructuring, as well credit rationing and bargaining with respect to investment. Privatized firms display profit-maximizing behavior, and a firm's export orientation and institutional features, such as insider vs outsider privatization, employee ownership, and employee control, do not affect the firm's employment and investment behavior. The results suggest that a major exposure to world competition induces similar economic behavior in firms with different structural and institutional characteristics.
Markets should be inefficient enough to allow returns to security analysis to adequately compensate the marginal analyst for his efforts. Cross-sectional differences in the costs of analysis ...therefore imply cross-sectional differences in market efficiency and in before-cost returns to smart investors. Small growth stocks are difficult to analyze and costly to trade. I find that the abnormal returns of mutual fund investments in small growth stocks from 1980 to 2006 averaged 0.76% per month. Large value stocks are easier to analyze and cheaper to trade. Mutual funds earned average monthly abnormal returns of only 0.05% in large value stocks during the same period.
Recent literature has found some evidence of performance persistence in hedge funds. This study investigated whether this persistence varies with fund characteristics, such as size and age. Previous ...research has found that funds face capacity constraints, that investment flows chase past performance, and that as funds age, they become more passively managed, which reduces the likelihood of performance persistence as funds grow older and larger. Consistent with this model, this study found that performance persistence is strongest among small, young funds. A portfolio of these funds with prior good performance outperformed a portfolio of large, mature funds with prior poor performance by 9.6 percent per year.
The financial crisis has highlighted the vulnerability of International Financial Centres (IFCs). However, little is known about specialised IFCs, neither about the impact on their niche activities ...nor about the conditions and strategies promoting resilience and recovery. This paper addresses these questions by examining the case of Luxembourg’s strategy of continuous innovation adopted to maintain its competitiveness, e. g., its high response flexibility towards exogenous challenges. Our empirical pre- and post-crisis data emphasise the constant reinforcement of Luxembourg’s competitive edge. Its success relies not solely on regulation but rather increasingly on the diversity and quality of the services offered by the financial industry itself. We show that the increasing concentration of banks and financial companies has, over time, created agglomeration economies and thus, strengthens Luxembourg’s position as a “global specialist”.
Die Finanzkrise hat die Anfälligkeit Internationaler Finanzzentren (IFZ) verdeutlicht. Jedoch ist wenig bekannt über spezialisierte IFZ, weder über die Konsequenzen für deren Nischenaktivitäten, noch über die Rahmenbedingungen und Strategien rascher Krisenbewältigung. Die vorliegende Analyse untersucht Luxemburgs Strategie der kontinuierlichen Innovationen zum Erhalt seiner Wettbewerbsfähigkeit, z.B. durch ein sehr flexibles Reaktionsvermögen auf externe Herausforderungen. Unsere empirischen Daten, die wir vor und nach der Krise erhoben haben, verdeutlichen Luxemburgs ständige Verbesserung seiner Wettbewerbsfähigkeit. Diese basieren nicht nur auf regulatorischen Aspekten, sondern zunehmend auf der Breite und Qualität der angebotenen Finanzprodukte. Der Beitrag zeigt, dass die steigende Konzentration von Banken und Finanzdienstleistern mit der Zeit Agglomerationsvorteile geschaffen hat und zu Luxemburgs Wahrnehmung als „globaler Spezialist“ beiträgt.
Purpose The purpose of this paper is to examine market concentration, economies of scale, economies of scope, and the relative size of a particular fund, within a fund family, as determinants of ...mutualfund expense ratio. This examination is focused at the assetmanager level and is based on the Morningstar equity and fixedincome style classifications. Designmethodologyapproach All data used in this study come from the July Morningstar Principia database for the years 1997 through 2006. One challenge of working with these data is that Morningstar treats each separate class of a fund as though it were an individual fund. As a result all Morningstar data items are reported for each fund class as though they are data items for a separate fund. The data are modified so that the items for separate classes of a fund are merged into data for a single fund. For example, assets in a fund become the total of the assets in each class of the fund. Findings This study contributes to the literature on mutualfund managers, and the literature on the structure of mutual funds, by showing that market concentration at the assetmanager level varies substantially across Morningstar styles, particularly for the fixedincome funds. The paper shows that increased market concentration is associated with greater expenses for the funds under management, within a given Morningstarstyle box, for both equity funds and for fixedincome funds. We also show that increased costs are partially offset by economies of scope for the fixedincome funds. Originalityvalue This paper extends the current literature in several ways. First, it confirms the existence of economies of scale at the fund level within Morningstar style classifications. Second, it documents the existence of varying levels of market concentration within different Morningstar style classifications. Third, the results demonstrate that there is a negative relation between the scope of funds handled across the Morningstar classifications by a particular fund manager and the expense ratio for particular funds. Finally, the results presented in this paper show that the largest funds within a family are associated with the highest expense ratios in the family.
Global public health issues, including tobacco use, will be addressed most effectively if informed by relevant evidence. Additional capacity is needed to undertake and sustain relevant and rigorous ...research that will inform and enable learning from interventions. Despite the undisputed importance of research capacity building (RCB), there is little evidence about how to create relevant capacities. RCB for tobacco control in Canada from 2000–2010 offers a rich experience from which to learn. Lessons were derived using structured data collection from seven capacity-building initiatives and an invitational workshop, at which reflections on major contributions and lessons learned were discussed by initiative leads. Ten years of RCB for tobacco control in Canada revealed the importance of a) taking an organic approach to RCB, b) targeting and sustaining investments in a mix of RCB activities, c) vision and collaborative leadership at organizational and initiative levels, d) a focus on building community, and e) studying capacity building. The experience also provided tangible examples of RCB initiatives and how independent investments can be linked to create a coherent approach. Looking ahead, promising directions may include positioning RCB within a broader context of “field building”, focusing on practical approaches to sustainability, and enhancing research on RCB.
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