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Risk Exposure and Net Flow in Investment Funds: Do Shareholders Monitor Asset Allocation?

Authors :
Rafael Felipe Schiozer
Diego Lins de Albuquerque Pennachi Tejerina
Source :
Revista Brasileira de Finanças, Vol 11, Iss 4, Pp 527-558 (2014)
Publication Year :
2014
Publisher :
Brazilian Society of Finance, 2014.

Abstract

This study investigates the impact of asset allocation on the net flow of fixed income funds in the Brazilian market, by exploiting the exogenous variation in the risk perception of bank liabilities (CDs) caused by the financial turmoil that followed Lehman Brothers’ demise in September 2008. The central hypothesis is that the exposure to assets negatively affected by the crisis impacts negatively the fund’s net flow. We find that, for mutual funds, the larger proportion of assets negatively affected by the crisis the larger the net outflow of resources, indicating that shareholders monitor asset allocation and exert disciplining power on fund managers by withdrawing their resources. In exclusive (fundos exclusivos, i.e., funds with a single shareholder), for which the shareholder is presumed to exert more influence on asset reallocation, we find no significant relationship between the exposure to assets negatively affected by the crisis and net flows.

Details

Language :
English, Portuguese
ISSN :
16790731 and 19845146
Volume :
11
Issue :
4
Database :
Directory of Open Access Journals
Journal :
Revista Brasileira de Finanças
Publication Type :
Academic Journal
Accession number :
edsdoj.09f2fc013f947eeab736247d28543ea
Document Type :
article