Performance And Performance Persistence Of Chinese Mutual Funds

Over the past few years,Chinese mutual funds have experienced dramatic growth and thus become an important investment bid in the capital market.By the end of February 2018,there have been 116 fund management companies in China.12 securities companies or asset management subsidiaries and 2 insurance asset management companies have always obtained the management qualification of mutual funds.The total assets of mutual funds managed by the above institutions have reached to 11.41 trillion yuan.With the growing demand for asset allocation in the whole society,mutual funds have become a common way for households and institutions to invest in assets in China.In particular,investors often choose to invest in equity funds or mixed-stock funds in order to obtain certain high returns.Therefore,how to select high-quality stock or mixed-stock funds has become a common concern of domestic and foreign researchers.Many individual investors invest in funds based on the historical performance of the funds,and a large number of studies have shown choosing funds by the historical performance is not the right choice.The history of fund performance is essentially a comprehensive reflection of the fund manager's management ability and the luck factors in the management technology.Therefore,the management ability of fund managers is not the only reflection of fund performance.During the evaluation of fund performance,many unskilled funds are mistaken for skilled funds because of "luck",which leads to the wrong choice of investors.How to separate skill from luck and find the skilled fund that has the ability to bring the excess returns to investors have attracted more and more attention.In our paper,we use the false discovery rate proposed by Barras,Scaille and Wermers(2010)to control the fund performance evaluation errors in judgment.We assess the alpha performance of 487 value funds,151 growth funds and 506 balanced funds that survived for more than three years.When we research the performance of different types of funds,Considering the convergence of the investment style of mutual funds in China,it is difficult for investors to effectively get the real performance of the fund.Therefore,we consider joining investment style related factors in the benchmark model,introducing investment convergence concept,using active peer benchmark to weaken residual serial correlation.The benchmark model of adding the style factor improves the significance of the estimation and enhances the accuracy of the model,which can help us identify skilled fund managers.In this paper,we control the FDR in the model,and obtain the proportion of lucky funds among a group of funds and get the percentage of truly skilled and unskilled funds.For different styles,the percentage of zero-alpha funds is about 70%,with the value fund accounting for 74.33%,and the balance fund accounting for 68.38%.Value funds have the highest percentage of skilled funds,while There are relatively few skilled funds in balanced and growth funds.Overall,the number of skilled funds is less than the number of unskilled funds in Chinese mutual funds market.There are very few truly skilled fund managers,with only 12.76%,and most of the funds have no ability to earn excess returns.controlling the FDR to choose skilled fund,we consider the fund performance persistence.We can find that skilled funds are located in the extreme right tail.By forming portfolios containing all funds in this extreme tail,we have a greater chance of capturing the superior alphas of the truly skilled funds.Overall,the model may be of great significance to domestic fund evaluation researches.We not only consider the style convergence factor characteristics of the fund,also take into account misjudgment situation in the performance estimation,which can help investors choose truly skilled managers.