Portfolio Concentration and Investment Manager Performance

38 Pages Posted: 13 Nov 2008

See all articles by Simone Brands

Simone Brands

UNSW Australia Business School, School of Banking and Finance

Stephen J. Brown

New York University - Stern School of Business

David R. Gallagher

Bond University

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

active equity portfolios. Active management is dependent on the success of two importantcomponents in the investment process stock selection skill and portfolio management. Ourstudy documents a positive relationship between fund performance and portfolio concentration. The relationship is stronger for stocks in which active managers hold overweight positions, as well as for stocks outside the largest 50 stocks listed on the Australian Stock Exchange (ASX). We find more concentrated funds tend to be those implementing growth styles, having smalleraggregate assets under management, being institutions which are not affiliated with a bank or life-office entity, whose funds experience past period outflows, and who are benchmarked to narrower indexes than the S&P/ASX 300.

Keywords: Portfolio concentration, investment performance, tracking error, active funds

Suggested Citation

Brands, Simone and Brown, Stephen J. and Gallagher, David R., Portfolio Concentration and Investment Manager Performance (2006). NYU Working Paper No. FIN-06-028, Available at SSRN: https://ssrn.com/abstract=1300769

Simone Brands (Contact Author)

UNSW Australia Business School, School of Banking and Finance

Sydney, NSW 2052
Australia

Stephen J. Brown

New York University - Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)

David R. Gallagher

Bond University ( email )

Centre for Data Analytics, Bond Business School
Gold Coast, QLD 4229
Australia

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