A Study On The Strategies Of Fund Families's Creating-star Based On The Governance Of Fund

In the deep development process of our securities market, as an interest-shared andrisk-shared professional aggregated investing tool, funds not only satisfy the personal needs,and also are favor of the development of securities market. Funds precipitate typicalprincipal-agent relations, the problem of principal-agent shows that the managers of fundcould damage the interests of investors for their own interests if the principal-agent was shortof the constraints of right fund governance, it will seriously hinder the development of ourcountry's fund market and the whole securities.Fund family is a set of funds that are inter-influence, interaction and co-existence in thesame fund company, at the same time, whose style, scale and performance are discrepant andrelative. Currently, fund families are very common and the most outstanding characteristics infund industry. As the fund industries' competition becoming more and more competitive,different fund rating and ranking exist in the fund market, the outstanding funds in the ratingand ranking are called as star funds, Some researches point that a mutual fund family thatowns a star fund will have spillover effect, it will make the managed fund become bigger andbigger, and then will induce the fund families to utilize the strategy that families will intentlycreate some star funds in their families. The strategies will brings economics of scale to thedistribution, servicing, and promotion of funds, and the same time the whole families'reputation can help to the investors' decisions to invest to the families.Basing on the importance of the fund families' creating-star strategy's influence to thefund market and the fact existing the phenomenon of creating-star in the fund market, how tosystematically and scientifically study fund families' creating-star strategy is very necessary.So, the paper tries to create a research-view and a research-method, and reaches to the targets:to find the fund companies' creating-star strategy's basic reason, road and rules, and toempirically judge the fund families of creating-star, finally, to control the fund companies'damaging the investors' interests with the improvement of the fund governance. According tothe targets, the paper's research road: if the star funds could own the spillover effect to the netcash inflow of their fund families and the funds in their families, there be probably families'favoritism phenomenon in fund families. Under the serious competition, the family with lowinvestment management ability would incline to pursue the creating star strategy,.So, thestar-fund families may not be a real strong families, it is nessasary to judge who is a real starfund family. Because of the real reason of creating-star is the defaults of fund governance, the paper studied the defaults of fund governance in our fund market and constructed a theoreticalplatform with core factors of fund governance to protect the investors interests under theinfluence of fund families' creating-star, it developed a new realistic road and frame for fundgovernance research.The main research results on the paper:1)The star fund in the mutual fund families will asymmetrically and siginificantly affecttheir cash inflow. On the families' level, star funds can bring significant new money net cashinflow to families, but also attract more new money to themselves and the other funds in thesame fund family. The spillover effect of the star performance fund the basic cause of thefamilies' creating-star strategy under the mutual fund family.2)There are family favoritism in the mutual fund family, as other words, the familieswill transfer their some funds' performances to some high-value fund in the same families toget over-performance in order to absorb in more net cash inflows, finally to improve thecompetitive abilities and whole families' profits, the family favoritism strategy is the road ofthe families' creating-star strategy.3)The research between the possibilities of the star performance and the characteristicsof mutual fund families show that the higher is cross-fund standard deviations of performance,the more is number of fund belong to family and the more impossible is having a star fund inthe last year, the higher is the probabilities of creating-fund, at the same time, with thecomparative analysis of the portfolios, finding that the family with low investmentmanagement ability would incline to pursue the creating star strategy to take advantage of thestar fund spillover effect. In all families, the higher cross-fund deviation star familyperformance are significantly poorer than the others, a simple chasing star family strategycould not deliver significant excessive benefits to an investor, but the star family with lowpossibility of creating star fund, the star family with low cross-funds standard deviation andsmall number of funds, has better performances than the others, it could be the most possiblereal "star" that could bring excessive returns for an investor. The results can efficiently helpfinding the real stars in fund families, it can make controlling the strategy possible.4) The essential reason of creating-star phenomenon is the defects in the fundgovernance. The strategy not only damages the investors' benefits and the normal order of thefund market. The research fund that the fund governance research system'sunder-development, the weakness of the social credibility and trusting basics, and theavoidance to the difficulties in the institution construction result in the our fund governance defects. The basic ways and methods that improves our fund governance are drawing theorganization of the company mutual fund, intensifying the constraint system to the persons offund management, consummating the incentive mechanism of fund governance, developingthe fund market competition.Nowadays, the research on the creating-star in fund families is high research value,compared to the past researches, the paper has the following creating-points andcontributions:1) On the research content, different from the past researches that only focused on theindividual fund, the paper studied the star performance how to affect families' cash flow fromthe whole family level and the individual fund under fund families' structure, at the same time,the paper still studied the star performance how to affect the fund families' competitivestrategies. The research results show that the reasons and rules of fund companies'creating-star strategy, and provide empirical assessment and theoretical guiding to theinvestors' pursuing the star funds.2) On the research logic, the paper showed that it has a tight logic relation among thefamilies' creating-star stategy's basic motion, road colletion, the judging makers of the real orfaults star-families, the main reasons and controlling of the families' creating-star behavior.The rearch logic has the original theorical contributions and important factual interesting onthe deep and systematic rearch on the families' creating strategy.3) On the research methods, the paper optimized explanatory variables according to thecharacteristics of our fund market, it improved the effectiveness of the model.With a Logitmodel to examine the relative family characteristics that could improve the possibility of starperformance, at same time, with the comparative analysis of the performances portfoliosbased on the families' characteristics, this expanded research method make the model morevisual. The paper also use the principle and method of the new institutional economics toresearch the fund governance model in China, the results can put across and be useful to thecreating-star phenomenon in our fund market.4) About the theoretical an realistic significance, under the background of fund families'creating-star, the paper constructs a theoretical platform of fund governance to protect theinvestors interests, it developed a new realistic road an frame for fund governance research.