Universität zu Köln

Hendriock, Mario (2020). Three Essays on Performance in Active Asset Management. PhD thesis, Universität zu Köln.

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Abstract

This thesis focuses on institutional investors in the form of active mutual funds and their ability to fulfill their mandate as delegated portfolio managers, which is to deliver the best risk-reward-trade-off, i.e., “performance", possible. In the first essay, we examine how labor mobility restrictions in the form of non-compete clauses in employment contracts affect employee behavior. We show that mutual fund managers respond to higher job termination costs due to increased enforceability of non-compete clauses by improving their fund performance, while also increasing window dressing and decreasing risk. The second essay is based on the notion that to optimally utilize their labor, fund families need to match their managers' skills with the job requirements of different funds. Families enable their managers to try out different funds in a learning-by-trying fashion until they find their best match. After they have reached their best match, managers operate at higher productivity levels, which then fund families utilize at a larger asset base. Moreover, fund families hire in accordance with their capability to make the match discovery possible. Managers exhibit a higher degree of conviction after their match discovery. In the last essay, I consider, which trading strategies differentiate skilled mutual fund managers. I provide evidence for a positive association between holdings' implied cost of capital (ICC) and future fund performance. Consistent with large transaction costs of ICC-based investments impeding their exploitation, family-level trading efficiency positively correlates with fund-level ICC. A negative association between ICCs and mid-year risk shifting corroborates the notion of fund managers decisively choosing high-ICC strategies. Institutional investors able to identify funds with high ICCs direct their investments accordingly, whereas flows of retail funds are unaffected, consistent with limited investor attention and financial literacy.

Item Type:	Thesis (PhD thesis)
Creators:	Creators Email ORCID ORCID Put Code Hendriock, Mario hendriock@wiso.uni-koeln.de UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-122241
Date:	2 September 2020
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Business Administration > Finance > Professorship for Business Administration and Finance
Subjects:	Social sciences Management and auxiliary services
Uncontrolled Keywords:	Keywords Language labor mobility, non-compete clauses, mutual funds, career concerns, internal labor markets, match finding, implied cost of capital, portfolio choice, financial forecasting UNSPECIFIED
Date of oral exam:	2 September 2020
Referee:	Name Academic Title Kempf, Alexander Prof. Dr. Hess, Dieter Prof. Dr. Korn, Olaf Prof. Dr.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/12224