Study On The Impact Of Net Inflows Of China’s Public Fund On Performance

In recent years,China’s fund market has developed rapidly,with funds becoming a well-known wealth management method that has gradually entered the daily lives of Chinese investors.As of November 30,2022,the scale of China’s public fund market has expanded more than tenfold from 2112.819 billion yuan in June 2010 to 27,069.746 billion yuan.A large influx of funds into the fund market is bound to cause changes.The increase in net fund inflows may make fund managers overly confident.This confidence may lead to fund managers adopting more risky investment strategies,such as over-concentrating investments in certain stocks or industries,or using high leverage for investments to pursue higher returns.At the same time,China has basic position limits for equity funds,and fund managers need to maintain high positions for the funds they manage.When net fund inflows increase,fund managers face greater pressure in managing funds.In order to avoid idle cash,fund managers need to invest these funds in the market to earn higher returns.However,most high-quality assets in the market have already been purchased by other investors,and these funds tend to be invested in lower-quality assets,such as market hotspots and high-risk stocks.Therefore,fund managers may be forced to choose riskier stocks in order to expect higher returns.Existing research in China has mainly focused on how the past performance of funds affects fund flows,with less attention paid to how fund flows affect fund performance.There are even fewer studies that explore the specific mechanisms of this impact.This article selects China’s open-ended equity funds from 2016 to2022 as the research object to empirically study the relationship between fund flow and performance.To explore the mechanism of how fund flow affects performance,this article innovatively uses the Value at Risk(Va R)of the asset portfolio of the fund’s heavy positions in each reporting period as a tool to measure fund risk and takes the risk of the fund’s heavy position asset portfolio as the mediating variable to further study the mediating effect of the risk of the fund’s heavy position asset portfolio in this process.This article summarizes the transmission chain of "fund net flow-risk of heavy position asset portfolio-fund performance" and proposes the hypothesis of this impact path: with the increase in fund net flow,fund managers have the motivation to hold riskier stocks to achieve better fund performance.At the same time,this article uses the fund’s Sharpe ratio as the second explanatory variable to explore whether the fund manager’s active management is effective.The main conclusions of this article are:(1)There is a positive correlation between net fund flows and performance of China’s stock open-end funds from2016 to 2022.(2)When the net fund flows increase,the fund manager tends to choose a riskier investment portfolio to achieve better performance.(3)The active management of the fund by the fund manager is effective,and the fund has generated alpha returns under the stimulation of net fund flows.