Does Overseas Experience Matter For Fund Managers In China?

In 2017,China's GDP has reached to 12.24 trillion US dollars,second only to US's 19.36 trillion US dollars,and its share of world GDP also increased to 15.87%.But at present,the size of China's financial industry does not match the size of the huge economy.By the end of 2017,the assets of mutual fund management in the United States amounted to 22.5 trillion US dollars,accounting for 116% of GDP.However,the assets of mutual fund management in China are only 7.97 trillion US dollars,accounting for 65.11% of GDP.This mismatch and demand means great development opportunities and potential for the financial industry.With the increase of trading volume and the gradual liberalization of market supervision,more and more opportunities are also accompanied.The huge potential of China's capital market has prompted many fund managers to return home for development.At the same time,as the ultimate decision-maker and implementer of fund investment decisions,the behavior of fund managers has a direct impact on fund performance.It is worth noting that fund managers' overseas experience in their resumes has been paid more and more attention by fund companies,and many fund companies have given priority to overseas experience in their recruitment conditions.There are many reasons for this.On the one hand,experience in more mature capital market could create an advantage over China's less developed market.Overseas experience has exposed them to many new financial innovations and a broad vision.On the investment concept,their original fund companies also give them the opportunity to observe the company's decision-making process closely and learn various management styles.And how to deal with the communication and cooperation between different offices around the world.These people have a deep understanding of the fundamentals and behaviors of the local market,a super ability to accurately identify excellent business models and leaders,critical thinking and timing judgment.On the other hand,overseas experience may also mean that they have a stronger ability,because the cost of working and studying abroad is higher.Therefore,people will choose to stay overseas only when the return is greater than the cost.Another phenomenon is that studying abroad has become an option for more and more students,and China has become the world's largest source of foreign students.Foreign students also tend to stay and work abroad,so does this mean brain drain or brain gain as some of these students return? Faced with such a situation,should the Chinese government take measures to attract these people back to China for development? In view of this phenomenon,this paper will select 284 common stock funds with the same fund manager's management time more than one year from 2014 to 2016 to explore whether the returned fund managers perform better.At the same time,using the same method,we will also discuss the performance of returned fund managers in the field of mixed partial equity funds.The research on the impact of manager characteristics on fund performance began in 1996,and managers' characteristics can be roughly divided into three categories: gender,educational background and experience.However,for each individual feature,these literatures cannot reach a consistent conclusion,so in this thesis,we will take all three types of features as control variables in order to minimize errors.Moreover,it is worth noting that there is no literature to examine overseas experience as a separate personal feature,and at most,overseas experience is taken as a control variable.Therefore,considering the phenomenon of returnee fund managers and the current enthusiasm for studying abroad,this study can provide some reference for individual,company and government decision-making.The research method can be divided into two steps: first,we need to use relevant models to find the indicators to measure fund performance.There are four metrics of fund performance in this paper,namely simple excess return,single-index alpha,three-factors alpha and four-factors alpha.Then,we use the fund performance metrics to regression the characteristics of fund managers,to examine whether the characteristics of overseas experience will have an impact on the performance of managers.If the coefficient of overseas experience is positive and statistically significant,it shows that fund managers with overseas experience perform better than local fund managers.Next,regarding the selection of control variables,referring to previous research on the impact of managers 'personal characteristics on performance,the influential factors are: age,gender,master's degree,doctor's degree,MBA degree,securities tenure,fund tenure and researcher's experience.In addition,previous literature also found that fund characteristics also have an impact on performance,they are turnover ratio,fee ratio,fund age.Regarding the data of this paper,we take January 2014 to December 2016 as the sample period,and select the fund managed by only one manager and managed for more than one year.Because the index fund belongs to the passive management fund,it cannot reflect the manager's ability of selecting stocks and timing,it is excluded.Ultimately,only 284 of 1028 stock funds meet all the above requirements.At the same time,because there are not many stock funds managed actively,in order to increase the number of samples,we relax the time limit for fund managers to manage,that is,not necessarily from January to December of a year,but from any month of a year,as long as the management time has reached 12 months.For mixed partial-equity funds,the sample selection period is from January 2000(the first public offering fund was established)to December 2017,and other conditions are consistent with the selection of equity funds.The only difference is that there are many mixed partial-equity funds,and the sample selection period is longer,and the data sources of fund characteristic variables are fund annual reports,so a complete number is adopted.Annual is more accurate,so we require managers to manage the time period from at least January of a year to the end of December of that year,that is,across a full accounting year.Different from foreign research on the impact of managers' personal characteristics on managers' performance where there is a complete database of fund managers' personal information available.At present,there is no relevant database in China.Therefore,the personal information of fund managers involved in this paper is collected manually.The personal information of fund managers is disclosed from annual reports of fund,and some of them whose age and securities tenure are not disclosed,then we will reasonably assume and calculate according to their enrollment time.For the empirical results,firstly,using the method mentioned above,we find that the coefficient of overseas empirical variables is negative and statistically significant,which indicates that fund managers with overseas experience perform worse than domestic fund managers.This result is different from previous studies which used overseas experience as a control variable.That study considered that overseas experience would not affect fund performance.The reason may be that study directly regarded fund returns as a regression dependent variable,which did not exclude the impact of the market,resulting in confusion of results.When we take simple excess return as dependent variable,the conclusion is consistent with that in this paper.Next,we explore the reasons why returnee fund managers perform worse from a risk perspective.In this paper,we use two risk measures,one is the total risk of the fund(measured by the standard deviation of return)and the other is the systemic risk of the fund(measured by the beta value in the CAMP model),in which the total risk includes systemic risk and non-systemic risk,and by reasonably increasing the number of assets,the non-systemic risk can theoretically be reduced to close to zero.Regressing risk indicators as dependent variables and managers' personal characteristics as independent variables,we find that managers tend to reduce systemic and total risks when managing portfolios.The reason may be that returnee managers have abundant management experience and mature capital market coping methods abroad,but they do not know much about the domestic capital market and related industries,resulting in their relatively conservative investment strategies to avoid asset losses caused by information disadvantage.As we expect,in capital markets,risk is proportional to return,and when their portfolio risk is lower than that of other managers,the return will be lower than that of other managers.Then,combining income and risk,this paper uses Sharpe ratio and Treynor ratio to measure whether returnee managers can balance return and risk.Here,we use Sharpe ratio and Treynor ratio as dependent variables,and manager's personal characteristics as independent variables for regression test.The results show that there is no significant correlation.This shows that returnee fund managers are no different from other fund managers in balancing risks and returns.The advantages that returnee managers are favored,namely,superb technical analysis and understanding of market operation principles,have not been reflected.Finally,we also examine whether returnee fund managers have the ability to select stocks and timing.Here we use T-M model,H-M model and C-L model to regression manager's personal characteristics with the stock selection timing coefficient obtained from the model.We find that in T-M model,returnee managers do not show better or worse stock selection and timing ability,while in H-M model and C-L model,their timing ability is worse,and there is no difference in stock selection between them and other managers.Similar to the research methods and processes of stock funds,we also studied the performance of returned fund managers in the field of mixed partial equity funds.The results show that they have no advantages or disadvantages in terms of fund performance,risk,risk-return balance and stock selection ability,but their timing ability will be inferior to that of local fund managers.Based on the above results,returnee managers do not show much management or analysis advantages.Although returnee fund managers will be a little mature in investment due to their overseas study or management experience,it is also related to their investment experience.The fund news department of Securities Daily found that the investment management experience of successful returnees(such as former Baoying Fund manager Wang Ruyuan and Yinhua Fund manager Jiao Wei)mainly came from relevant industry experience and domestic financial institutions.Therefore,this result can be used for reference by investors,fund managers,fund companies and the government.For investors,they need not consider the returnee halo of managers,but should choose fund managers rationally according to their performance,relevant securities industry experience and industry experience.For the returned managers who hope to continue their outstanding performance abroad after returning home,they should return to China as a newcomer rather than indulge in their previous brilliant achievements.They should have a deep understanding of the operation rules of the domestic capital market and the company in the industry.As for fund companies,fund managers of fund companies generally cultivate themselves mostly,but self-cultivation needs a lot of manpower and material resources,and more time,and the talents who spend a lot of time and energy self-cultivation are also facing the problem of loss.Overseas markets,especially in developed countries,are more mature,so they are more willing to recruit returnees for investment and capital operation.Therefore,fund companies recruit returnees to quench their thirst,but considering the performance of returnee managers,fund companies may not need additional pay increases in the recruitment process.For the government,although the returnee fund managers have not performed better in China,we cannot deny their brilliant achievements abroad and their excellent abilities.Talents have a natural demonstration role and industrial agglomeration effect.Therefore,it is of great benefit to the economic development of our country to adopt appropriate policies to encourage talents to return home.