Performance Ranking and Style Drift of Public Offering Funds Based on The DGTW Approach

Cheng Yan ； Shunzai Xu ； Yidang Ke

《Business and Technology Innovation Journal》 3卷1期 (2023/06) Pp. 27-54

https://doi.org/10.29680/BTIJ.202306_3(1).0003

摘要

Due to the information asymmetry between investors and fund managers, under the pressure of performance ranking, some public fund managers would take advantage of their own information advantages, deviate from the investment direction agreed in the contract, and change the original investment style. In order to protect the rights and interests of investors, regulators have recently restricted the phenomenon of fund style drift and the behavior of "style drift" and "high turnover rate" to gain short-term trading profits. In this context, the research on the relationship between performance ranking and style drift of public funds has strong practical significance. By constructing DGTW style index and using position-based fund style identification method, this paper identifies the actual investment style of Chinese public funds from 2011 to 2021. Through the relationship between interim performance ranking and fund style drift, and taking the change of fund manager, market environment, fund size and the proportion of fund shares held by institutional investors as moderating variables, this paper analyzed the moderating factors between interim performance ranking and fund style drift. Then the influence of fund style drift on fund flow is also analyzed. The results shown that style drift is common in China's public funds, and the net inflow of funds could be promoted through fund style drift. Among them, the change of fund manager had a positive moderating effect on the relationship between interim performance ranking and fund style drift, and the proportion of institutional investors had a negative moderating effect on the relationship. Based on this, our country should further improve and perfect the fund style monitoring mechanism. All fund managers and fund custodians shall adhere to the spirit of the contract, fulfill their fiduciary obligations, and abide by various laws and regulations. It is prohibited to mislead investors and damage the credibility of the industry. In addition, the risk committee of the fund company should carry out irregular inspection and supervision, and punish the fund manager who frequently happens to drift the style of the fund, so as to prevent and control the risk of the fund operation.

關鍵字

Fund Contract ； Style Drift ； DGTW ； Ranking Pressure ； Spirit of Contract

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