The global financial crisis and the mutual fund flow-performance relationship

摘要

Existing research shows mutual fund flow is highly correlated with past performance in an asymmetric way, namely flow-performance convexity. Fund managers pursue incentives to manipulate fund characteristics to invoke future fund inflows. Given this body of evidence, how has the global financial crisis impacted on fund volatility and fee structures with respect to the flow-performance relationship? Using data for the period 1999 to 2011 (disaggregated into three sample periods) for US mutual equity funds, empirical analysis in this study shows mutual funds adopt a low-risk strategy resulting in the greatest flow-performance sensitivity. An incremental dampening effect is observed on flow-performance convexity due to increasing riskiness of portfolios, more significant in the GFC period. In addition, the results indicate that pure operating expense weakens the flow-performance sensitivity, especially in the post-GFC period. Advertising effects trigger greater investor response to past performance, particularly throughout the GFC. It is also documented that front-end load is not a statistically significant in determining the flow-performance relationship; nevertheless, back-end load on average dampens investor response to past performance, and this dampening impact is more evident in the post-GFC period.