An Empirical Research On The Effect Of Change Of Size On Investment Behaviour And Performance Of Open-ended Funds

Since the open-ended fund appeared in 2001 in our country, its scale has expanded constantly, types have gradually increased and can meet the needs of more and more different investors, experienced more than ten years of development. Faced with the cash flow poured uninterruptedly by investors, the fund how to be conducted effective investment, it becomes a great challenge to fund managers.Based on the principal-agent theory, scale diseconomy and liquidity hypothesis, choosing1730 equity and hybrid funds of open-ended ones as sample during 2005-2014, this paper studied change of fund investment behaviour and portfolio, also and the reason of difference of performance caused by open-ended fund size changes.The study founded that if the flow increases, liquidity of stock portfolio will decline but diversification will increase. The reason of liquidity declining is the increase in absolute ownership of shares. Subjected to sharesholding liquidity constraints, portfolio liquidity drops,and that of bulk-holding stocks is more obvious. After joining fund characteristics, I found that large funds can relieve inflows to lower liquidity. Diversification increases mainly by increasing the number of stocks and reducing the proportion of bulk-holdings. Diversification can alleviate the liquidity constraints to a certain extent, but doesn’t solve the decline in liquidity brought by the flow. Less liquidity damages performance while excessive diversification goes against the access to information advantage, adverse to the performance. Generally, diversification and liquidity need to keep moderate balance.By analysis, the fund family is seen as the combination of the funds managed in this article,so its essence is a large fund. The article found that with the change of size, the change of family behavior and funds’ have convergence. Flow increasing, the liquidity of family portfolio gets bad,but the decline of big families is less than that of small ones. With the increase of the scale,shareholding dispersion will rise. Less liquidity makes family performance decline while diversification has a positive impact to some extent.