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Shedding light on the exposure of mutual funds: Which investments drive mutual fund characteristics?

Author

Listed:
  • Lukas Benz

    (University of Augsburg)

  • Martin Rohleder

    (University of Augsburg)

  • Janik Syryca

    (University of Augsburg)

  • Marco Wilkens

    (University of Augsburg)

Abstract

This paper is the first to identify and classify nearly all investment instruments held by equity funds by investigating their portfolio holdings. This enables us to analyze the effects of long and short exposures from different complex instruments including short sales, options and futures but also previously neglected derivatives like warrants and units on funds’ risk, performance and other characteristics. These analyses are of general interest, especially in the light of ongoing discussions regarding further regulation of complex instrument use by mutual funds. Our empirical analyses document that on average more than 40% of funds use complex instruments. However, relative to their total assets, funds’ average exposure from such positions is very small with values below 2%. Consequentially, the effects of instruments are often weaker than suggested by previous research or even show opposite directions.

Suggested Citation

  • Lukas Benz & Martin Rohleder & Janik Syryca & Marco Wilkens, 2019. "Shedding light on the exposure of mutual funds: Which investments drive mutual fund characteristics?," Journal of Asset Management, Palgrave Macmillan, vol. 20(7), pages 534-551, December.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:7:d:10.1057_s41260-019-00144-2
    DOI: 10.1057/s41260-019-00144-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Equity mutual funds; Risk; Performance; Derivatives; Complex investments; Holdings;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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