Study on the Characteristics of Fund Managers and the Impacts on Fund
Performance in China1
Tiao-yan Hui1, Yun Chang2
Department of Economics and Management, Xidian University, Xi’an, China
(1huity@163.com, 2changyun0304@163.com)
Abstract - This paper makes an empirical study on
fund manager’s personal characteristics and its
impact on fund performance, using the data of open
stock and hybrid funds in china from 2005 to 2010.
Through descriptive statistics and regression analysis
by SPSS13.0, the results show that: fund manager’s
Securities business time and with MBA degree have
significant positive impacts on fund performance; the
manager numbers of a fund and fund manager’s
gender have no significant impacts on risk-adjusted
performance; While, differing from our perception,
fund manager’s overseas experience is significantly
negatively related to fund performance. In addition,
securities market has significant impact on fund riskadjusted performance, which is significantly better
especially in bull market.
Keywords - Fund manager, Personal characteristics,
Fund performance, Risk-adjusted performance
I. INTRODUCTION
With the development of the economic and the
capital market, securities investment fund has not only
become the most influential institutional investors in the
stock market, but also the main channel for people to
invest for its professional management with higher return
and lower risk.
Fund manager’s personal characteristics largely
determine the style, even the performance of a fund, so
it's believed that people choose a fund to a certain extent,
is to choose a fund manager [1]. To date, prior literatures
have examined the impacts of fund manager's incentive
and fund performance. Some scholars hold that there
should be some evidence that some fund managers are
better than others. However, the issue of fund manager’s
personal characteristics has received limited attention in
the literature. In this paper we focus on the fund
managers' personal characteristics and its impact on fund
performance, hoping to shed light on selecting fund
manager for fund management companies and investors.
II. LITERATURE REVIEW
Chvalier, Judith A. and Glenn Ellison(1999) choose
fund excess profits, fund risk, fund management fees,
fund rate, fund changing hands rate as the dependent
1 Supported by the National Science Fund of China (NO: 70802047)
variables, while the fund manager age, educational
background, tenure as the dependent variables to explore
the relationship between fund manager's personal
characteristics and fund performance by 3sls regression in
United States. The result shows that the younger, with an
MBA, longer term of a manager, the better the
performance is. The most significant predictor of
performance is his or her tenure [2]. Israelsen(1998) found
that the term of fund manager more than 6 years with
better performance and lower turnover rate．Chen&Lin
（ l999 ） thought that fund performance is the key to
attract and retain investors. Kon(2000) indicated that
experienced fund managers in the short term achieve
better performance. Richard T ． Bliss and Mark E ．
Potter(2001) showed that female fund managers had
higher risk appetite and better performance than male [3].
Xizhe Yang(2009) found that the female, older, operated
less fund and well educated fund manager performed
better.
Based on 54 closed-end funds of 2004 year in China,
Mingdong Xu and Jie Li(2005) studied the fund
managers’ personal characteristics, such as age,
education, gender, experience, tenure and investment
style, and found that the fund manager with MBA degree
don’t have better performance, and their age is negative
related to performance. Mingdong Xu(2006) thought the
managers with longer working experience do not perform
as good as new fund managers in China due to their
ideological conservative in order to control risk results [4].
Xiaoyan Hu(2011)found that stock selection ability of the
fund managers from institution was significantly better
than others [5].
III. EMPIRICAL RESEARCH
A. Data
The data is based on the equity open-end Fund and
the mixed open-end fund from 2005 to 2010 year in
China, excluding bond funds, currency funds and QDII
fund. All the data is from the Genius database, wind
database.
B. Descriptive statistics of the fund manager
characteristics
In this paper, fund manager’s characteristics mainly
include the following indicators:
Personal Factors
Age(xi)/Gender(x2)
Educational
Background
Degree(x3)/Subject(x4)/MBA(x5)
Occupational
Securities business time(x6)/Personal
background(x7) /Numbers of fund
management team（x8）/Numbers of
managed fund（x9）/tenure（x10）
Postgraduate
Certificate（x11）/Overseas
background(x12)
1.. Personal factors - Age/ Gender
From the research samples in 2005 -2010 year, fund
managers' average age is between 35-37 years old, the
minimum is 27, and the maximum is 49, mainly
concentrated in the age of 33-43.
Yue Tan(2009) found that the higher the degree of
fund managers, the worse is fund performance according
to data of the closed-end funds from 2002-2008 in China
[7]
. It seems to be not consistent with ordinary judgment.
Possible explanation is that the highly educated fund
managers in venture capital are risk averse or neutral, so
they can’t achieve excessive profits. From valid data of
2005-2010, it can be seen that 80% of the fund managers
have master degree. The proportion of fund managers
with doctor degree rose from 17% in 2005 to 77% in
2010, and its proportion is going upward year after year.
100
80
60
40
20
0
Ratio（%）
TABLE I
Main Indicators of fund manager characteristics
2005
2006
2007
Bachelor
2008
Master
2009
2010
Year
Doctor
Fig.3.The Fund Manager’s Degree
Number
150
100
50
0
2005
2006
Less than 33
2007
33-37
2008
38-43
2009
2010
Year
More than 43
In China, there is more than 80% fund manager with
degrees majoring in finance and economics. The reason
probably is that fund operation requires certain amount of
knowledge of economic, financial and management.
Major in science is good to data analysis and risk control,
but not sensitive to the economic phenomenon. Master of
Business Administration （MBA） is a master's degree
specializing in training senior professional managers.
Fig.1. The Fund Manager’s Age
400
Richard T（2001）found that the fund risk level of
female managers is higher than the male managers [6].
However, Atkinson ， Baird ， Frye （ 2003 ） thought
gender was not an important indicator for the fund
manager, and male managers and female managers had
no significant differences in performance. But due to
gender prejudice, female fund managers are rare in China.
There is no evidence that female ability is inferior to men,
but demanding more for female fund managers in the
selection practice. The ability of female fund managers
won a lot of praise, but from the date of fund managers in
china, the ratio of male to female is still higher than 10:1.
300
Number
200
100
0
2005
2006 2007 2008 2009
Science Not Science
2010
Year
Fig.4.The Fund Manager ’s Major
600
400
200
Number
600
400
Number
200
0
2005
2006
2007
MBA
2008 2009
Not-MBA
2010
Year
Fig.5.The Fund Manager’s degree of MBA
0
2005
2006
2007
2008
Male
Female
2009
2010
Year
Fig.2. The Fund Manager’s Gender
2.
Fund
manager
Degree/Subject/MBA
educational
background
3. Occupational characteristics –Securities business
times/Personal background / Numbers of fund
management team / Numbers of managed fund/Tenure
Fund managers’ average experience of Securities jobs
is about 8-9 years, and it has an increasing tendency. The
shortest is only 0.5 years of experience of Securities to
become a fund manager, while the longest has 20 years
experience of Securities.
300
300
200
200
Number
100
Number
100
0
2005
0-5years
2006
2007
6-10years
2008
2009
2010
Year
More than 10years
Fig.6.The Fund Manager ’s Securities Business Time
Today, fund managers are mainly come from other
fund managers, fund manager assistants, or research/
investment/analysis person, which respectively accounted
for accounted for 50%, 25%, 25%.
Number
200
150
100
0
2005
2006
0-1years
2007
1-2yewas
2008
2-3years
2009
2010
Year
More Than 3years
Fig.9. Number Of Managers To A Fund
Generally, it’s believed that fund manager’s tenure
(the length of time a manager has managed his fund) and
fund performance is positively correlated, it means that
the longer tenure of fund manager, the more experienced
and the better his performance is. The fund manager’s
performance is ranked and known by the public, which
means only competent managers can stay in business for
long time. So his tenure can well reflect his ability and
performance [10]. The fund manager’s average tenure is
from 8 to 24 months in the period of 2005 to 2010 year in
China.
TABLE II
The fund manager’s average tenure
50
Year
0
Time(month)）
2005
2006
2007
2008
2009
2010
Year
2005
2006
2007
2008
2009
2010
12
8
11
16
21
24
Fund manager assistant
4. The fund manager postgraduate-Certificate/Returnees
Fund manager
Gottesman and Morey(2006) examined the fund
managers’ education and their performance and found
that there is a significant positive correlation between
GMAT scores and fund performance , whether they have
such as CFA certificates or doctorate degree has no
influence on their performance [11]. But in the financial
industry, the CFA, FRM, CPA and other relevant
international professional qualifications are considered to
be representative of the personal expertise. As shown in
the illustration, the number of the certificate holder has an
increasing trend, rising from 9.94% in 2005 to 19.3% in
2010.
Research/Investment/Analysis person
Fig.7.The Fund Manager ’s Personal Background
Aiqing Zeng (2010) found that managing more funds
can made the fund managers invest more energy, it is
helpful to improve the fund performance [8]. Qiu (2003)
thought that Multi-manager can brainstorm, diversify
investment style, and group decision-making [9]. While,
too much managers for a fund, decision-making need
more time and difficult to reach consensus. Today, many
funds have 2 fund managers in china
400
300
Number
200
500
400
300
200
100
0
100
2005
2006
2007
HOLD
2008
2009
Not HOLD
2010 Year
0
2005
2006
2007
Two or more fund
2008
2009
2010
One fund
Fig.8. Numbers Of Managed Fund By A Manager
Fig.10.The Fund Manager’s Certification With CFA/FRM/CPA
Xiujuan Zhao, Shouyang Wang(2010) researched
fund performance in China from 2004 to 2006, the
relationship between overseas background and earning
capacity or risk control is not significant. The
performance of the overseas fund managers have fallen
short of expectations [12]. A considerable portion of
China’s fund managers had studied or worked abroad, it
is useful to master advanced risk management and fund
operating methods. The data show that the portion of
China's fund managers with overseas background is
maintained at about 13%.
Fund Risk-adjusted
Performance
TABLE IV
The results of regression analysis
Number
500
400
300
200
100
0
Fund Return
SC
2005
2006
2007
Returnees
2008
2009
Un-Returnees
2010
Year
Fig.11.The Fund Manager’s Oversea Experience
C. Analysis of the fund manager characteristics’ Impact
on fund performance
This paper makes an empirical study on the fund
manager characteristics and fund performance using
regression analysis by SPSS. In order to ensure the
stability of results, the explained variables include Fund
return, Fund risk and Fund risk-adjusted performance.
The empirical results show that: the fund manager
with MBA degree and his experience of Securities has
significant positive impact on fund return and Fund riskadjusted performance at the 0.05 level, which is
consistent to the research results of Chvalier. At present,
there are a lot of fund managers with MBA, who worked
long and came from famous universities such as Tsinghua
University, Peking University. So, the working practice
and theory studying make manager more competent [13].
The fund manager’s experience of Securities has
significant positive impact on fund return and Fund riskadjusted performance at the 0.1 level, which is consistent
to the research results of Xizhe Li. In 2010 year, the
average experience of Securities of und manager is 8.2
years. The longer experience of Securities means the
more knowledge about financial market, same as the
wilder channel for messages, above all positive impact on
fund operation [14].
The fund manager’s overseas experience has
significant negative impact on fund return and Fund riskadjusted performance at the 0.05 level. In the recent
years, the fund manager with overseas background often
been questioned, it is not only due to the different
national circumstances, but also the fund manager is easy
to inherit foreign fund investment style which not fit
china. At present, the stock market changed quickly in
China, although the fund manager with overseas
background has excellent ability to control risk, but
weaker profitability.
Fund return
TABLE III
Variables Introductions
An annual average rate of return of
the fund more than the fund industry
The standard deviation of
the return of fund
X2
X3.1
X3.2
X4
X5
X6
X7.1
X7.2
X8
X9
X10
X11
X12
t
Sig
Fund Risk
t
SC
-.037 .971
C
X1
Fund risk
Adjusted Sharp index, it is the ratio
of fund return to fund risk
-.027 -.957 .339
Sig
Fund riskadjusted
Performance
SC
9.906 .000
.014
.698
t
Sig
-.053 .958
.486 -.026 -.942 .346
.020
.774
.439 -.034 -1.822 .069
.021
.790
.430
.017
.384
.701 -.011 -.343 .732
.016
.366
.714
.004
.085
.932
.411
.003
.068
.946
.006
.236
.814 -.023 -1.239 .216
.007
.285
.775
.026
.823
.077 2.592 .010 -.007 -.304 .761
.076 2.537 .011
.053 1.863 .063
.027 1.339 .181
.051 1.811 .070
.020
.720
.472
.031 1.533 .125
.019
.701
.483
.019
.697
.486 -.023 -1.175 .240
.020
.755
.450
-.009 -.347 .728 -.110 -5.723 .000 -.008 -.306 .759
.035 1.299 .194 -.039 -2.000 .046
.037 1.369 .171
.007
.265
.791 -.044 -2.348 .019
.009
.337
.736
.021
.786
.432
.022
.840
.401
.027 1.382 .167
-.065 -2.185 .029 -.009 -.437 .662 -.064 -2.165 .031
BULL
.082 2.831 .005
.457 21.785 .000
BEAR
-.008 -.271 .786
.723 34.059 .000 -.014 -.461 .645
SCALE
.046 1.732 .083
.151 7.912 .000
SF
.076 2.624 .009
.046 1.745 .081
F=1.712
F=85.901
F=1.658
Sig.=0.035
Sig.=0.000
Sig.=0.044
SC- Standard coefficient; SF- simulation fitting degree
X3.1- MASTER; X3.2- DOCTOR;
X7.1- FROM MANAGER’ ASSISTANT;
X7.2- FROM RESEARCH/INVESTMENT/ANALYSIS.PERSON
Male fund manager, Numbers of fund manager,
Numbers of managed fund and his tenure have significant
negative impacts on fund risk, but not significant impact
on Fund risk-adjusted performance. Now, there are more
and more female fund managers, who are generally
considered to be cautious, exquisite and their investment
style is conservative. But the empirical results do not
support this view, regardless of fund return or risk
control, the male is better than the female, who may be
more exuberant and more acute insight
The more funds managed, the fund manager has more
recognition and stronger ability, but it’s easy to diversify
his work effort.The empirical results shows that the
numbers of managed fund has significant positive impact
on the risk control and positive impact on Fund riskadjusted performance, but not significantly. A lot of
members of a fund management team is easy to shirk
responsibility, leading to both fund return and risk low,
but it has significant positive impact on risk control.[15]
The longer of fund manager’s tenure, the more fund
return but not significantly. It because that they would
rather give up the risk-profit in order to not make
mistakes, so it made the operational risk in low level, but
not significant impact on Fund risk-adjusted performance.
IV. SUGGESTIONS
The personality characteristics of fund managers
have important effects on fund performance. Firstly, to
the choosing of fund managers, fund company should
give priority to the factors that experience of Securities
and MBA degree, not blindly worship his oversea
experience. Secondly, it’s important to strengthen
professional training for fund managers through wellknown college or expert training courses lectures as
MBA, update their knowledge to improve the ability of
fund operation. Thirdly, it’s necessary to carry out
investors education to make investors have a clear
positioning and chose fund manager properly, such as the
risk averse investors to choose the fund manager who is
male, his tenure is long, the numbers of fund manager and
numbers of managed fund are more, and so on.
Finally, fund manager’s frequent turnover is serious
in china, which largely obstruct to form a steadily
investment style and achieve good fund performance. It’s
time to take some measures to let fund managers to hold
their self-managed funds, so as to his interests are well
consistent with the interests of investors and encourage
him work hard to improve fund performance effectively.
REFERENCES
[1] Junying Hu.The impact of the personality characteristics of
China’s
fund
managers
on
the
fund
performance[J].Economic
Research
Guide,2009(32)
(in Chinese).
[2] Chevalier G.Career Concerns of Mutual Fund Managers.
Quarterly Journal of Economics, 1999,114(2).
[3] Alexander,Stefan Ruenzi. Status Quo Bias and the Number
of Alternatives: An Empirical Illustration from the Mutual
Fund Industry,2006(204).
[4] Dongming Xv,Jay Li. The relationship analysis of fund
manager characteristics and performance [J]. World
Economic Outlook, 2005(9) (in Chinese).
[5] Xiaoyan Hu. The relationship of the personal characteristics
of fund managers and fund performance[J].Modern
Business,2010(32) (in Chinese).
[6] Atkinson SM, Baird. SB, Frye .MB. Do female mutual fund
managers manage differently[J].Journal of Financial
Research,2003,26(1).
[7] Yue Tan,Hongzhi Tang,Zhishuo Chen. The analysis of fund
manager characteristic and performance [EB].CFRN
Working Paper, 2010-01-21/2012-03-22(in Chinese).
[8] Aiqin Zen ．An correlation Empirical Analysis of China
fund manager characteristics and fund performance[J].
Journal of Hunan College of Finance and Economics.
2011(5) (in Chinese).
[9] Michael K,Berkowitz, Jiaping Qiu. Ownership risk and
performance
of
mutual
fund
management
companies[J].Journal of economics and business, 2003,
55(2).
[10] Cha Qi. Study on behavior of the securities investment fund
managers and fund performance [D].Hunan University,
2006(in Chinese).
[11] Acon A Gottesman．Manager education and mutual fund
performance[J]. Journal of Empirical Finance,2006,13(2).
[12] Xiujuan Zhao, Shouyang Wang. The extent of the fund
managers affect the fund performance[J]. Management
Review,2010(1) (in Chinese).
[13] Jianhua Dai. Empirical research of the impact of China
fund manager’s ability of selected stock, timing and
personal characteristics on fund performance[D].Fudan
University, 2009(in Chinese).
[14] Chuanyou Xv, Songlian Tang. Which characteristic
decision to enhance the performance of fund manager
[J].Shanghai Management Science,2010(1) (in Chinese).
[15] Guopeng Zu, Zheng Zhang, Shengping Zhang. Mode
choice
of
fund
management
and
fund
performance[J].Research On Financial And Economic
Issues,2010(12) (in Chinese).