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Fund Characteristics, Managerial Skills and Performance Persistence: Evidence from India

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Abstract

This study investigates the relationship of fund managers’ performance persistence with (a) personal characteristics of managers and (b) fund characteristics. The study uses a sample of fund managers from India to create a comprehensive dataset of manager returns from December 2006 to March 2022. Using the four factor performance model of Carhart (1997), we investigate the persistence in manager performance across (a) managerial characteristics and (b) fund characteristics based on one month holding period returns over previous 24-months estimation period. The study indicates considerable persistence among the top decile fund managers who are male, MBA-postgraduate, undergraduate with technical qualifications, and also from top institutions. It is also evident among managers who are old, and possess long experience. We also find evidence of persistence in the performance of managers from foreign funds, Indian funds, and also for the joint venture predominantly Indian funds. This study allows investors in mutual funds to make more informed decisions. It is also useful for recruiters and policymakers who are responsible for appointing mutual fund managers and making policy recommendations in light of continuing regulatory changes. This can be considered one of the earliest studies to analyse the relationship of fund managers performance persistence with (a) personal characteristics of managers and (b) fund characteristics from the perspective of an emerging Indian economy.

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Notes

  1. Scopus database, last access on 14.02.2023.

  2. The Association of Mutual Funds in India (AMFI) is regulator of the Indian Mutual Fund Industry, dedicated to protecting and promoting the interests of mutual funds and their unit holders. https://www.amfiindia.com/indian-mutual#:~:text=Assets%20Under%20Management%20(AUM)%20of,a%20span%20of%2010%20years. We use average conversion rate for presenting in US dollars is ₹ 75 = $1.

  3. Databank on Global Financial Development, The World Bank. https://databank.worldbank.org/source/global-financial-development/Series/GFDD.DI.07.

  4. Securities and Exchange Board of India, regulator of Indian securities market. Web source: - www.sebi.gov.in.

  5. ICRA Report on “Mutual Fund Screener 2023”. https://www.icraanalytics.com/img/PDF/MF/Mutual%20Fund%20Screener.pdf.

  6. The Association of Mutual Funds in India (AMFI) is regulator of the Indian Mutual Fund Industry, dedicated to protecting and promoting the interests of mutual funds and their unit holders. https://www.amfiindia.com/.

  7. Data repository for Indian market, maintained by IIM Ahmedabad. http://www.iimahd.ernet.in/~iffm/Indian-Fama-French-Momentum/.

  8. Managers with higher (lower) t-statistics of alpha are sorted into decile 10 (decile 1).

  9. NIRF score is an indicator of the quality of educational institutions in India, released by Govt. of India. Weblink for additional details: https://www.nirfindia.org/Home.

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Acknowledgements

The authors would like to thank Parama Barai (IIT Kharagpur), the editors, and the anonymous reviewers whose comments were helpful in improving this work. S. Majumdar also thank the UGC for financial support throughout the study period, however, the UGC in whatsoever manner wasn’t involved in data collection, empirical design and analysis, or preparation and review of the manuscript. Usual disclaimers apply.

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  1. Vinod Gupta School of Management, Indian Institute of Technology, Kharagpur, 721302, India

    Sudipta Majumdar, Rohan Kumar Mishra & Abhijeet Chandra

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  1. Sudipta Majumdar
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Correspondence to Sudipta Majumdar.

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Majumdar, S., Mishra, R.K. & Chandra, A. Fund Characteristics, Managerial Skills and Performance Persistence: Evidence from India. Asia-Pac Financ Markets (2023). https://doi.org/10.1007/s10690-023-09417-8

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