RAMOS Sofia

In Test 1, we clearly demonstrate that the flow-performance relationship is convex, but only in the medium to high performance range. We show that it is in fact concave in the low to medium performance range. The main finding of Trial 3 is that the composition of the fund's portfolio has an impact on the fund's flow-performance sensitivity (FPS). Specifically, a mutual fund manager can reduce flow performance sensitivity by increasing the total equity portfolio weighting in defensive and sensitive stocks, where the former is more efficient. In Essay 2, I examine the active equity mutual funds that most closely approximate new investors. This stock is surprising by its very nature. It is a form of turning away paying customers that results in lost revenue, at least in the short run. I show that the performance of funds close to new investors declines as sharply as that of funds of comparable size and past performance that remain open.

Investment manager skill is one of the most studied topics in finance, so readers may wonder why there are still theses like this one launching three new Essays on the topic. Taken together, these essays contribute to various streams of the investment management literature by taking a fresh look at skill in asset classes where it is difficult to measure (private equity), or where the topic has not been studied in depth.) The results yield contrasting results, as there is substantial evidence of skill for private equity, even after fees, but less evidence of skill for mutual fund families. Possible reasons for this discrepancy may include high fund manager incentives in private equity, diminishing returns to scale in the mutual fund industry, search costs for investors, market inefficiency, or a combination of these factors. These Essays also contain useful information for practitioners and investors. By identifying at least a few skill determinants, practitioners can gain insight into the behaviors that add (or subtract) to the value of their funds. By quantifying and locating competencies across different types of funds, study results can also help investors focus their search for competencies, and at least increase the likelihood of finding a qualified fund manager. To conclude this introduction, the topic of fund management skill is extremely important to many people, but it is a complex topic that still needs a lot of serious research. The best I can hope for is that these Essays shed new light on some aspects of the subject that have not yet been fully explored in the existing literature. On a personal note, I found the research to be a very interesting and challenging task that provided a rich framework to advance my skills as an empirical financial researcher. I hope you enjoy reading these Essays as much as I enjoyed putting them together.