Research On The Impact Of Local Bias Of China’s FOF Allocation On Product Performance

Starting from the initial exploration of China’s securities market in the 90 s of the20 th century,after experiencing industry norms,product innovation and now to the stage of steady development,the development of China’s fund industry has gone through more than 30 years.In 1997 and 2004,the relevant laws of the securities investment fund industry were successively promulgated,which further standardized the development of the fund industry,and the improvement of the system helped the scientific development of the fund industry.The Administrative Measures for the Operation of Publicly Offered Securities Investment Funds,implemented in 2014,clearly determine the legal status of publicly offered FOF funds in China.In 2016,the China Securities Regulatory Commission(CSRC)officially issued the Guidelines for the Operation of Publicly Offered Securities Investment Funds No.2-Guidelines for Funds within Funds(Draft for Comments),which further regulated the subject matter,risk disclosure,fund fees,investment objects and other aspects of China’s publicly offered FOF funds,and guided the substantive operation of China’s publicly offered FOF funds.In October 2017,China’s first public FOF fund was born.Contrary to the "Rational Man" hypothesis,both individual and institutional investors in capital markets have shown a preference to invest in asset classes that are geographically closer to them.Whether this kind of "local preference" behavior of investors will significantly improve the performance of products has attracted widespread attention from scholars at home and abroad.However,there is little research on the local preference behavior of the emerging institutional investor "Chinese public FOF fund".In order to control the backfill bias,this paper removes the sample data in the fourth quarter of 2017 and analyzes the impact of local preference of Chinese public FOF funds on product performance from 2018 to 2020.The empirical analysis results show that the local preference behavior of Chinese public FOF funds is widespread,and this preference significantly improves the product performance of public FOF funds.Through further subdivision of the sample test,it is found that there are differences in the impact of local preference behavior on product performance under different investment types(secondary classification),different risk levels,different investment objectives and whether they are initial funds.Empirical analysis shows that the local preference behavior of partial equity hybrid FOF,Risk-4 FOF,target date FOF and initial fund FOF has a more significant positive impact on the performance of FOF fund products.Starting from the perspective of information asymmetry,this paper conducts theoretical analysis and empirical research on the relationship between local preference and product performance of Chinese public FOF funds.It has made a certain incremental contribution to the research on the behavior of institutional investors in the capital market and the influencing factors of the performance of China’s public FOF funds.In addition,it puts forward regulatory suggestions for the financial regulatory authorities to further standardize the operation order of China’s public FOF fund market,crack down on the improper behavior of public FOF funds to transfer funds to internal funds to be liquidated,and protect the interests of investors.It also provides practical suggestions for the innovation of China’s public FOF fund products and the optimization of FOF fund system.