Fund manager research fails to identify impact of actions
Fund managers may be missing out on valuable information because of the data set used in research that fails to take their actions into account, research reveals.
The study from the Centre for International Finance and Regulation (CIFR) found "having access to granular trade data in combination with portfolio holdings to identify the source of alpha generation," enabled managers to show their "skill".
"We show that the data sets used in much of fund management research may not be very effective at identifying the implications of manager actions, and hence the identification of skill in making a case for or against active funds management," the authors said.
"Our analysis confirms that trading makes a significant contribution to manager performance; and that this contribution can be effectively estimated with access to trade data.
"Further, data on both portfolio holdings and the timing and price of trades is required to correctly evaluate association tax effects.
"Our access to both daily on-market trades and holding data allows us to show how interim trading and related tax impacts can be linked to fund performance, with far more precision than is available using either periodic holdings data or trade data in isolation."
AUTHOR
Nicholas O'Donoghue
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