The Influence Of Open-end Fund Style Drift On Fund Performance

The explosive development of the public fund industry has provided investors with a rich product system,but it has also increased the difficulty for investors to choose.Due to the asymmetry of information,there is a principal-agent relationship between fund managers and investors,and the fund's actual investment style and nominal investment style are prone to deviations.On the one hand,the drift of the fund's investment style increases the uncertainty of investor returns and has an important impact on investors' asset allocation.On the other hand,fund investment style drift actually belongs to the fund manager's default behavior.In the stage of transition from "big asset management" to "strong supervision",the phenomenon of fund investment style drift needs to be focused on to regulate the development of the asset management industry.This article selects a total of 305 stock and partial stock open-end funds established before 2012.Carhart's four-factor model was used to perform regression analysis on each fund to identify its actual investment style and whether style drift occurred between 2013 and 2018.In order to explore the influence mechanism of fund style drift on fund performance,this article explains more clearly how fund style drift affects fund performance from two paths,ranking pressure and fund internal structure change.This paper also uses the F-F three-factor model to do a robustness test,and increases the previous period performance as a control group to reduce the effect of inertia effects between performance.The research results found that the drift of the fund's actual investment style is widespread in China's fund market.In the context of market price rotation,fund investment style drift can obtain excess returns more than a single investment style.From the perspective of ranking,fund style drift will strengthen the impact of performance ranking pressure on fund performance.The top-ranked funds are generally the funds of large well-known fund companies,which have stronger comprehensive strength and can better adjust the fund's underlying asset allocation as the market changes.From the perspective of changes in the internal structure of the fund,fund style drift will weaken the impact of fund manager changes on fund performance.Due to the inconsistency in investment style and investment philosophy between current and former fund managers,the uncertainty of fund manager changes usually has more negative effects than positive effects on fund performance.Compared to insisting on the investment strategy of his predecessor,changing the investment style and choosing his own investment philosophy and investment style can reduce the negative impact of fund manager changes to a certain extent.