A Study On The Industry Allocation Strategy And Performance Of Open-end Funds

Since the beginning of the twenty-first century, the world’s capital markets are showing aoverall pattern full of fluctuation and adjustment. Due to the different impact of economiccycles in different industries, the prosperity demonstrated significant differences betweenindustries in every economic cycle. The correlation between economic cycle and the degree ofindustry prosperity provides the possibility for positive industry allocation strategy to obtainexcess returns. In addition, as China’s stock market came into a revising pattern and showed amore and more prominent phenomenon of industry conversion at the end of2008, China’ssecurities investment funds has focus more emphasis on the importance of industry allocationstrategy on the performance of the fund. What’s more, this environmentthe brings about a newfund product called industry revision fund, which is characterized by positive industryallocation strategy. Therefore, the industry allocation strategy has become an importantmanner to improve the fund performance, which has been paid more attention by our fundmanagers.The industry allocation strategy of securities investment fund is a kind of aseessallocation strategy that investors choose florescent industries in the different stages of theeconomic cycle according to the relationship between economic cycle and the degree ofindustry prosperity, and then improve the weights of florescent industries. The industryallocation strategy aims to increase the excess return over market average level and is the keystep in the top-down investment strategy. Beacause of the the special capital marketenvironment featuring price shock and industry isomorphism in China, the study on theindustry allocation strategy and performance of mutual fund has a strong theoretical andpractical value, which can both help fund managers aware of the importance of the industryallocation and help investors choose an appropriate fund product meeting their own needs.This paper focuses on industry allocation strategy, using a method combining theoreticaland empirical research on the basis of reading a large number of domestic and foreignliteratures. It selected40open stock funds which were established before2006as studysample, and determined January1,2006to December31,2011as the whole sudy periodwhich was divided into three sub-intervals of the bull market, bear market and fluctant market. By use of column associated table method, iterative method and the multiple regressionmethod, the influencing factors of industry allocation strategy, the relationship betweenindustry allocation strategy and fund performance in addiontion to the deep-seated reasons indifferent capital market environment have been releaved comprehensively and systematically.Finally, some feasible proposals were provided for investors, fund managers and fundcompanies to improve fund performance on the basis of the actual situation of China’s capitalmarket.