Does the Management Fee Signal the Performance of Equity Investment Funds in Brazil?
DOI:
https://doi.org/10.17524/repec.v12i3.1717Keywords:
Investment funds, management fee, performanceAbstract
Objective: Analyze the relation between the management fee and the risk-adjusted performance before fees of active investment funds classified as Ibovespa and investigate if the difference in fees reflects differences in the value the funds create for the investor. Method: Therefore, a panel regression was applied, using a pooled model in which the funds’ risk-adjusted performance served as the dependent variable and the management fee as the explanatory variable. Then, other control variables were included in the regression. To measure the fund performance, the models of Carhart (1997) and Fama and French (1993, 2015) were used. Results: The results appointed a negative relation between management fee and performance. This indicates that the funds in the sample that cover high fees generally perform worse for the investor. Hence, the different fees also reflect differences in the value the funds create for the investor. In addition, the net equity of a fund is positively related with its performance, while age is negatively related and the Anbima seal did not reveal statistical significance. Contributions: This research adds to the results in the literature as follows: a negative relation is shown between management fee and performance, even when controlling for variables such as size, age and quality in terms of corporate governance. In addition, this relation exists independently of the model used to measure the fund performance; in addition, more current evidence is presented and for an emerging market. Also, evidence is provided that the best corporate governance practices are not related with the achievement of good performance.References
Alda, M., Andreu, L. & Sarto, J. L. (2017). Learning about individual managers’ performance in UK pension funds: The importance of specialization. The North American Journal of Economics and Finance, 42, pp. 654-667. doi: https://doi.org/10.1016/j.najef.2017.09.006
Anbima (2016). Fundos de Investimentos. Relatórios, boletim, mar. 2016. Recuperado em 17 de março, 2016 de http://portal.anbima.com.br/informacoes-tecnicas/boletins/fundos-de-investimento/Documents/BoletimFI_201603.pdf .
Anbima (2017). Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais. Fundos de Investimento – Consolidado Histórico de Fundos de Investimento, janeiro de 2017. Recuperado em 14 de janeiro, 2017 de http://www.anbima.com.br/pt_br/assuntos/fundos-de-investimento.htm
Anbima, & Fgv (2016). Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais; Fundação Getúlio Vargas. Indústria de Fundos de Investimento. Anuário 2016. Recuperado em 07 de abril, 2017 de http://cef.fgv.br/sites/cef.fgv.br/files/Anuario_FGV%202016_internet.pdf
Carhart, M. M. (1997). On persistence in mutual fund performance. The Journal of Finance, 52(1), pp. 57-82. doi: https://doi.org/10.1111/j.1540-6261.1997.tb03808.x
Carneiro, R. L. A.(2014). A Influência da Certificação dos Administradores de Carteira Brasileiros no Desempenho de Fundos de Investimento. Dissertação de Mestrado em Administração - Centro de Pós-Graduação e Pesquisa em Administração- FACE-UFMG, Belo Horizonte, MG, Brasil..
Castro, B. R. & Minardi, A. M. A. F. (2009). Comparação do desempenho dos fundos de ações ativos e passivos. Revista Brasileira de Finanças, 7(2), pp. 143–161.
Chen, J., Hong, H., Huang, M. & Kubik, J. D. (2004). Does fund size erode mutual fund performance? The role of liquidity and organization. The American Economic Review, 94(5), pp. 1276-1302. doi: https://doi.org/10.1257/0002828043052277
CVM (2014). Comissão de Valores Mobiliários. Texto Integral da Instrução CVM n.º 555, de 17 de dezembro de 2014, com as Alterações Introduzidas pelas Instruções CVM n.º 563/1, 564/15 E 572/15. Dispõe sobre a constituição, a administração, o funcionamento e a divulgação de informações dos fundos de investimento. Rio de Janeiro, RJ, Brasil.
CVM (2014). Fundos de investimento. Comissão de Valores Mobiliários (Cadernos CVM, 3). Rio de Janeiro: Comissão de Valores Mobiliários, 40.
Dalmácio, F. Z., Nossa, V. & Zanquetto Filho, H. (2007). Avaliação da relação entre a performance e a taxa de administração dos fundos de ações ativos brasileiros. Revista de Educação e Pesquisa em Contabilidade, 1(3), pp. 1-20.
Dalmácio, F. Z., Nossa, V., Louzada, L. C. & Santanna, D. P. (2010). A Relação entre a Performance (Risco x Retorno) e a Taxa de Performance, Cobrada ou Não pelas Instituições Administradoras dos Fundos de Ações Ativos Brasileiros: uma Abordagem à Luz da Teoria de Agência. Congresso USP de Controladoria e Contabilidade, São Paulo, SP, Brasil, 5.
Dellva, W. L. & Olson, G. T. (1998). The relationship between mutual fund fees and expenses and their effects on performance. Financial Review, 33(1), pp. 85-104. doi: https://doi.org/10.1111/j.1540-6288.1998.tb01609.x
Fama, E. F. & French, K. R. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), pp. 1-22. doi: http://dx.doi.org/10.1016/j.jfineco.2014.10.010
Fama, E. F. & French, K. R.(1996). The CAPM is wanted, dead or alive. The Journal of Finance, 51(5), pp. 1947-1958. doi: https://doi.org/10.1111/j.1540-6261.1996.tb05233.x
Fama, E. F. & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), pp 3-56. doi: https://doi.org/10.1016/0304-405X(93)90023-5
Favero, L. P., Belfiore, P., Silva, F. D. & Chan, B. L. (2009). Análise de dados: modelagem multivariada para tomada de decisões. Rio de Janeiro: Elsevier.
Gil-Bazo, J. & Ruiz-Verdú, P. (2009). The relation between price and performance in the mutual fund industry. The Journal of Finance, 64(5), pp. 2153-2183. doi: https://doi.org/10.1111/j.1540-6261.2009.01497.x
Gil-Bazo, J. & Ruiz-Verdu, P. (2008). When cheaper is better: Fee determination in the market for equity mutual funds. Journal of Economic Behavior & Organization, 67(3-4), pp. 871-885. Doi: https://doi.org/10.1016/j.jebo.2007.04.003
Grinblatt, M., & Titman, S. (1989). Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings. The Journal of Business, 62(3), pp. 393-416.
Golec, J. H. (1996). The effects of mutual fund managers' characteristics on their portfolio performance, risk and fees. Financial Services Review, 5(2), pp. 133-147. doi: https://doi.org/10.1016/S1057-0810(96)90006-2
Haque, T. & Ahmed, A. D. (2015). The Relationship between Australian Mutual Fund Fees and Risk‐Adjusted Performance in Differing Economic Conditions. Australian Economic Papers, 54(1), pp. 1-21. doi: https://doi.org/10.1111/1467-8454.12036
Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. The Journal of Finance, 23(2), pp. 389-416. doi: https://doi.org/10.1111/j.1540-6261.1968.tb00815.x
Mansor, F., Bhatti, M. I. & Ariff, M. (2015). New evidence on the impact of fees on mutual fund performance of two types of funds. Journal of International Financial Markets, Institutions and Money, 35, pp. 102-115. doi: https://doi.org/10.1016/j.intfin.2014.12.009
Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), pp. 77-91. doi: http://dx.doi.org/10.1111/j.1540-6261.1952.tb01525.x
Milani, B. & Ceretta, P. S. (2013). Efeito tamanho nos fundos de investimento brasileiros. Revista de Administração da Universidade Federal de Santa Maria, 6(1). doi: https://doi.org/10.5902/198346593607
Milan, P. L. A. B. & Eid Junior, W. (2014). Elevada rotatividade de carteiras e o desempenho dos fundos de investimento em ações. Revista Brasileira de Finanças, 12(4).
Nerasti, J. N. & Lucinda, C. R. (2016). Persistência de Desempenho em Fundos de Ações no Brasil. Revista Brasileira de Finanças, 14(2).
Paz, R. L., Iquiapaza, R. A. & Bressan, A. A. (2017). Influence of investors’ monitoring on equity mutual funds performance. Revista de Gestão, Finanças e Contabilidade, 7(2), p.79.
Pollet, J. M. & Wilson, M. (2008). How does size affect mutual fund behavior?. The Journal of Finance, 63(6), pp. 2941-2969. doi: https://doi.org/10.1111/j.1540-6261.2008.01417.x
Rochman, R. R. & Ribeiro, M. P. (2003, setembro). A Relação entre a Estrutura, Conduta e Desempenho da Indústria de Fundos de Investimento: um estudo de painel. Anais do Encontro da Associação Nacional de Pós-graduação e Pesquisa em Administração, Atibaia, SP, Brasil, 27.
Roll, R. (1977) A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory. Journal of Financial Economics, 4(2), pp. 129-176. doi: https://doi.org/10.1016/0304-405X(77)90009-5
Ross, S. A. (1976). The arbitrage theory of capital asset pricing. Journal of Economic Theory, 13(3), pp. 341-360. doi: http://dx.doi.org/10.1016/0022-0531(76)90046-6
Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39(1), pp. 119-138.
Vidal, M., Vidal-García, J., Lean, H. H. & Uddin, G. S. (2015). The relation between fees and return predictability in the mutual fund industry. Economic Modelling, 47, pp. 260-270. doi: https://doi.org/10.1016/j.econmod.2015.02.036
Downloads
Published
How to Cite
Issue
Section
License
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 3.0 Unported License, which allows the sharing of the work and recognition of authorship and its initial publication in this journal. This license allows others to distribute, remix, adapt, or create derivative works, even for commercial purposes, provided credit is given for the original creation.
b)There is no financial compensation to the authors in any capacity, for articles published in RePEc.c) The articles published in RePEc are the sole responsibility of the authors.
