Carretta, Alessandro and Mattarocci, Gianluca (2005): Funds of funds portfolio composition and its impact on the performance: evidence from the Italian market.
Download (303kB) | Preview
Funds of Funds (FoF) are particular investment funds that invest resources in some mutual funds. This type of funds offers the possibility to achieve an higher diversification that an investor can’t realize using other instruments. One of the main differences among FoFs available is the strategy adopted by the manager to select the investment funds to include in the portfolio and the number of funds included in the portfolio. The funds’selection could be naïf or based on some aspect related to the funds‘ history as the past performance achieved, the fund’s investment style or the manager’s reputation. This paper analyses FoF’s Italian market and verifies whether the performance is influenced by either the diversification strategy or the number of funds included in the portfolio. The analysis demonstrates that FoFs’ best performers are those which are less geographically or sectorially concentrated; there are significant differences following different criteria/constraints applied in the funds’ selection.
|Item Type:||MPRA Paper|
|Institution:||University of Rome Tor Vergata - Sefemeq department|
|Original Title:||Funds of funds portfolio composition and its impact on the performance: evidence from the Italian market|
|Keywords:||Fund of Funds; Diversification and Portfolio strategy|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions
|Depositing User:||Gianluca Mattarocci|
|Date Deposited:||31. Jul 2007|
|Last Modified:||14. Feb 2013 13:27|
Amenc N., Martellini L., Vaissié M. and Giraud J.R. (2004), An overview of European multimanagement practice, EDEC working paper Assogestioni (2004), Guida Italiana al Risparmio Gestito, Fact Book Barry C. B. and Starks L.T. (1984), “Investment management and risk sharing with multiple managers”, Journal of Finance, vol. 39, n° 2, pp. 477-491 Berk J.B. and Xu J. (2004), Persistence and fund flows of the worst performing mutual funds,NBER working paper Bisogni G.B. (2000), “Il fondo di fondi” in Assogestioni (2000), La disciplina delle gestioni patrimoniali, Bancaria Editrice, pp. 286-303 Blake C.R. and Morey M.R. (2000), “Morningstar ratings and mutual funds performance”, Journal of Financial and Quantitative Analysis, vol. 35, n° 3, pp. 451-483. Brands S. and Gallagher D.R. (2004), A note on portfolio selection, diversification and Fund of Funds, working paper Brands S. and Gallagher D.R. (2003), Portfolio selection, diversification and Fund of Funds, working paper Brown K.G., Harlow W.V. and Starks L.T. (1996), “Of tournaments and temptations: an analysis of managerial incentives in the mutual funds industry”, Journal of Finance, vol. 51, n° 1, pp. 85-110 Brown S.J., Goetzmann W.N. and Liang B. (2004), Fees on fees on funds of funds, Yale ICF working paper Cardani A., Comi E. and Lazzari V. (2003), L’offerta dei fondi di fondi speculativi in Italia, LIUC papers Carhart M.M. (1997), “On persistence in mutual fund performance”, Journal of Finance, vol. 52, n° 1, pp. 57-82 Carretta A. and Mattarocci G. (2005), The performance evaluation of hedge funds: a comparison of different approaches, working paper Chevalier J. and Ellison G. (1999), “Are some mutual fund managers better than others? Cross sectional patterns in behavior and performance”, Journal of Finance, vol. 54, pp. 875-899 Chevalier J. and Ellison G. (1999), “Career concerns of mutual fund manager”, Quarterly Journal of Economics, vol. 114, pp. 389-432 Ciquemani G. and Siciliano G. (2001), Quanto sono grandi i vantaggi della diversificazione? Un’applicazione alle gestioni patrimoniali in fondi e ai fondi di fondi; Quaderni di finanza della CONSOB n° 47 Colombini F., Mancini A. and Mannucci S. (2003), La performance dei fondi comuni d’investimento, Edibank, pp. 43-56 Connelly T.J. (1997), “Multi-fund diversification issues”, Journal of Financial Planning, n° 8, art.7 Cucurachi P.A. (1999), “L’analisi delle performance e la valutazione degli asset manager” in Carluccio E.M.(1999), Strategie, benchmarking e performance nell’asset management, Bancaria Editrice, pp. 119-170 Cucurachi P.A. (2005), “I fondi di fondi: una verifica empirica”, in Anderloni L. (2005), L’innovazione finanziaria. Osservatorio Newfin 2004, Bancaria Editrice, pp. 363-376 Davidson C. (2003), The fund of funds market: a global review, AltAsset research Elton E.J. and Gruber M.J. (1977), “Risk reduction and portfolio size: an analytical solution”, Journal of Business, vol. 50, n° 4, pp. 415-437 Elton E.J., Gruber M.J. and Blake C.R. (2003), “Incentive fees and mutual funds”, Journal of Finance, vol. 58, n° 2, pp. 779-804 Evans J.L. and Archer S.H. (1968), “Diversification and the reduction of dispersion: an empirical analysis”, Journal of Finance, vol. 23, n° 5, pp. 761-767 Farrell M. and Gregoriou G. (2000), “Funds of funds: when more definitely means less”, Canadian Business Economic, vol. 8, n°2, pp. 82-85 Goodwin T. (1998), “The Information ratio”, Financial Analyst Journal, vol.54, n. 4, pp. 34-43 Grinblatt M. and Titman S. (1992), “The persistence of mutual fund performance”, Journal of Finance, vol. 47, n° 5, pp. 1977-1984 Grinblatt M. and Titman S. (1993), “Performance measurement without benchmarks: an examination of mutual fund returns”, Journal of Business, vol. 66, n° 1, pp. 47-68 Jensen M.C. (1968), “The performance of mutual funds in the period 1945-1964”, Journal of Finance, vol. 23, n. 1, pp. 28-30 Jerome S. (2004), Quantitative analysis of asset allocation in a multi-manager fund: an application to the gold mining sector, HEC working paper Kat A. (2002), Portfolios of hedge funds, Alternative Investment Research Centre working paper King B.F. (1966), “Market and industry factors in stock price behavior”, Journal of Business, vol.39, n° 1, pp. 139-190 Lazzari V. (2003), Modelli organizzativi ed operativi delle SGR speculative italiane, LIUC papers Lhabitant F.S. and Learned M. (2002), Hedge funds diversification: how much is enough?, FAME research paper Liang B. (2002), Hedge funds, funds of funds and commodity trading advisor, CWRU working paper Liang B. (2003), On the performance of alternative investments: CTAs, hedge funds and funds of funds, working paper Linciano N. and Marrocco E. (2002), Fondi di fondi e accordi di retrocessione, Quaderni di Finanza CONSOB Markowitz H. (1952), “Portfolio selection”, Journal of Finance, vol. 7, pp. 77-91 Mattoo M. (2004), “Structured alternative investment products”, in Euromoney Institutional Investors (2004) Euromoney Alternative Investments Handbook 2004/05, Euromoney yearbooks, pp. 96-103 Moultrup J. (1998), “The Multiple-Equity Fund Portfolio Investment Strategy, Part I”, Journal of Financial Planning, n° 8, art. 11 Moultrup J. (1998), “The Multiple-Equity Fund Portfolio Investment Strategy, Part II”, Journal of Financial Planning, n° 8, art. 13 O’Neal E.S. (1997), “How many mutual funds constitute a diversified mutual funds portfolio?”, Financial Analyst Journal, pp. 37-46 Park J. M. and Staum J.C. (1998), “Funds of funds diversification: how much is enough?”, Journal of Alternative Investment, vol. 1, n° 3, pp. 39-42 Potter M.E. (2001), What you see is not what you get: mutual fund tracking error and fund diversification properties, Babson College working paper Sharpe W.F. (1981), “Decentralized investment management”, Journal of Finance, vol. 36, n° 2, pp. 217-234 Sharpe W.F. (1994), “The Sharpe ratio”, The Journal of Portfolio Management, vol. 21, n.1 pp. 49-58 Sharpe W.F. (1998), “Morningstar risk adjusted rating”, Financial Analyst Journal, vol. 7-8, pp. 21-33 Statman M. (2004), “The diversification puzzle”, Financial Analyst Journal, vol. 60, n° 4, pp. 44-53 Still L. (2004), Why are funds of funds increasingly popular?, Equinox newsletter, n° 6, p. 690 Treynor J. (1965), “How to rate Management of investment funds”, Harward Business Review, vol. 44, n. 1, pp. 131-136 Waring B., Whitney D., Pirone J. and Castille C. (2000), “Optimizing manager structure and budgeting manager risk”, Journal of Portfolio Management, vol. 26, no. 3, pp. 90–104 Wermers R. (2000), “Mutual fund performance: an empirical decomposition into stock picking talent, style, transaction costs and expenses”, Journal of Finance, vol. 55, n° 4, pp. 1655-1695