Research On The Optimal Management Scale Of Funds Based On Berk-Green Model

With the Chinese fund market breaking through 20 trillion yuan in 2020,fund issuance,investment,and scale expansion have entered an explosive period.However,in the process of continuous expansion of fund size,it is a hot issue for investors and fund managers to consider whether the size can continue to increase in the future.Determining the upper limit of fund size growth can provide quantitative reference for investors when investing,and also provide theoretical support for fund managers to better control fund size.At the same time,it also responds to the guidance of regulatory agencies for the healthy and sound development of the fund market.Based on the Berk-Green model,this paper models the optimal size of fund managers and the optimal size of fund investors.By optimizing the objective function solved by the model,it enhances the applicability of the model in the Chinese public fund market,obtains the upper and lower limits of the optimal size of the fund,and proves the rationality of the existence of the optimal management size range of the fund.Further,a Gaussian mixture model is used to classify the state of China’s financial market,thereby providing the optimal fund management scale for different market states in the empirical stage.The empirical part of this article selects China’s open-end funds,which were established between 2007 and 2021,and applies the improved fund optimal management scale measurement model to find that(1)China’s fund managers’ average investment ability is not significant,and the fund products have previously been highly homogeneous,failing to reflect differentiation.(2)From the perspective of fund size,although the overall size of the fund market has increased year by year,the annual average management scale of a single fund has been continuously shrinking from 2009 to 2022.(3)In terms of control over fund size,the fund size was excessively expanded in 2013-2014,insufficient in 2019-2020,and fund managers had good control over the size in2017-2018,2021-2022.(4)Under different market conditions,during recessionary crisis periods and momentum climbing periods,fund managers have better control over the size,and the average size of the fund is within the optimal management size range?During the period of recovery shock and overheated bull market,fund managers overestimated their abilities and expanded their scale too quickly,while during the period of stagflation and bear market,they underestimated their abilities.This article constructs an interval model for the optimal management scale of funds from the perspectives of fund managers and investors,and analyzes the appropriateness of fund size control based on different market conditions in China.It provides regulators,fund managers,and fund investors with criteria and recommendations for evaluating the optimal management scale of funds,providing reasonable reference for China’s public funds facing a rapidly expanding market trend and choosing whether to expand indefinitely or to have constraints,It also inspired thinking about the safety and profitability of public fund investment.