Research On The Polarization Of Investment Beliefs Of Private Fund

After experiencing explosive growth,the overall growth trend of Chinese private equity funds has slowed down,and the market structure has begun to show a clear polarization.Funds continue to gather to a few head institutions,and the "head effect" is gradually increasing.The problems of "small quantity,""low quality," "short investment,"and "difficulty in raising funds" are particularly prominent among small and medium-sized institutions,and short-term behavior and speculation are prevalent,resulting in the absence of a multi-level organic ecology for the formation of long-term capital,and therefore unable to form effective support for long-term capital.In the context of the serious polarization in the private equity market,a question of great concern is whether the investment philosophy of private equity funds has also polarized and if the investment philosophy does show polarizing characteristics,what is the mechanism of polarization formation?What does the polarization of investment philosophy mean for the management of the private equity market and for the internal governance of funds?Polarization studies originated from the study of the phenomenon of polarization of income distribution.Pioneering contributions were made by Esteban,J.&D.Ray(1994)and Foster,J.and M.C.Wolfson(1992).Duclos et al.(2004)proposed a DER polarization index based on the "identification-dissociation" framework,which laid the theoretical foundation for studying polarization formation mechanisms.Foster&Wolfson(2009)proposed the Wolfson polarization index to measure the level of polarization based on the idea of "increased spread" and "increased bipolarity,"emphasizing the idea that people in the middle of the income distribution diverge to the two ends.The existing polarization studies mainly focus on income distribution,but there is little literature on polarization studies in the field of investment philosophy research.Investment philosophy represents the fund manager's views,and beliefs about the investment market reflect the fund manager's psychological expectations about the market and are the underlying framework and decision basis for guiding investment decisions.Investment philosophy polarization differs significantly from income distribution polarization in that income is an observable variable,while investment philosophy is an unobservable qualitative variable implicitly embedded in investment strategy.Let the set B={Bi,i=1,2,…} denote the investment philosophy of investors in the market.An investor can have several different investment philosophies(e.g.,risk control philosophy,investment horizon philosophy,etc.).When the investment philosophy is put into practice,it is transformed into an investment strategy,which can be represented by portfolio P={Pj,j=1,2,…},and the corresponding investment return is represented by R={Rs,s=1,2,…}.Since investment ideas are implicitly embedded in investment strategies and unobservable,this poses a great challenge for polarization measurement of investment ideas.The investment ideas in the set B are not independent of each other,and multiple investment ideas may correspond to the same portfolio,which also creates difficulties in identifying the relationship between investment ideas and investment returns.One effective way to measure investment idea polarization is to establish an exclusive correspondence between investment ideas and portfolios and to identify investment ideas through observations of portfolios.But the problem is that the correspondence between the investment ideas in the pooled B and the portfolio in the pooled P is not a one-to-one relationship but a many-to-one relationship.To this end,this paper proposes a new framework for analyzing investment ideas,namely,the"investment idea? investment strategy(portfolio)? investment return" framework.The significance of this framework is to reclassify the investment ideas in B based on the structure and characteristics of the portfolios in set P,so that the investment ideas in set P form a one-to-one relationship with the characteristics of the portfolios in set B,and the portfolio characteristics are used to identify the investment ideas.The investment philosophy analysis framework proposed in this paper directs the investment philosophy implicit in the investment strategy through the portfolio structure and characteristics to turn it from unobservable to observable,thus achieving the measurability of investment philosophy polarization.Under the framework of investment philosophy analysis,this paper focuses on the polarization measures of investment risk control philosophy,investment duration control philosophy,the polarization formation mechanism,the dynamic evolution of investment philosophy polarization,the heterogeneity of investment philosophy polarization in Chinese and foreign private equity funds,and the issue of investment philosophy polarization and the influencing factors of its decomposition based on Chinese private equity fund data.This paper uses a combination of normative and empirical analyses.The normative analysis is mainly used to elaborate and analyze the "investment philosophy-investment strategy-investment return" analysis framework.The empirical analysis mainly uses the Wolfson polarization index proposed by Foster&Wolfson(2009)and the DER polarization index proposed by Duclos et al.(2004).The analysis of the polarization formation mechanism mainly relies on the decomposition of the DER polarization index into intra-group agreeableness and inter-group detachment and uses this to analyze and explain the polarization formation mechanism of investment ideas.Data source:The data used in this article is taken from the website of HowBuy Funds.With the exclusion of incomplete data,the total sample would have been 15,996 funds,accounting for 30.7%of the total number of funds.The research in this paper not only extends the polarization study from the field of income distribution to the field of investment philosophy but also extends the investment philosophy study from normative to empirical research.From the practical level,the study of polarization measurement of investment philosophy and its formation mechanism can examine the polarization state of private fund managers' investment philosophy,the evolution trend,and the formation mechanism of polarization of investment philosophy,and provide important clues and decision basis for the effective management of private funds by the securities regulator.The main innovations of this paper are as follows:1.Theoretical innovations mainly include:(1)A new investment philosophy polarization analysis framework is proposed.The significance of this analysis framework lies in that starting from the structure and characteristics of the investment portfolio,a one-to-one correspondence relationship is established between the investment philosophy and the investment portfolio by"re-classifying" investment philosophy set,which makes different investment philosophies no longer relevant and makes it possible to measure the polarization of investment philosophies.(2)The research on polarization is expanded from the field of income distribution to the field of investment philosophy,which expands the research field of polarization and provides evidence of investment philosophy for analyzing the hidden reasons behind the structural differentiation of China's private fund market.2.Empirical innovations include:Through empirical analysis,this paper reveals the polarization degree of investment philosophy implied behind the structural differentiation of private funds in China,and the formation mechanism of polarization of investment philosophy.Shortcomings and problems to be further solved(1)Under the framework of investment philosophy analysis,this paper only studies the polarization of "return volatility","maximum withdrawal" and "investment term",which are not involved in other investment philosophies.The conclusion of this paper is only limited to investment risk control concept and investment term concept.(2)The samples used in this paper do not include private fund samples and venture capital fund samples.This is mainly due to the lack of systematic statistics.(3)The investment philosophy of private funds is a very broad field.The investment philosophy studied in this paper is a limited part of the concept.It is a topic to be further studied in the future on how to further broaden the scope of polarization measurement of the investment philosophy.