Fund manager performance in Emerging Market: factor specialization and financial crisis impact

In the branch of literature dealing with analysis of the consistency of management styles, this paper investigates the relation, between portfolio concentration and the performance of emerging market equity funds. Unlike previous studies, on global and us mutual fund, we focus on emerging markets equity, finding funds with higher levels of tracking error, display lower performance than funds with less diversified portfolios when we don’t take into account specific concentration in holding in different multifactor style. The explanatory power of local models that use local explanatory returns is recently investigated by De Groot et al. (2012), Cakici et. al (2013) and Fama and French (2012). Following same research line, most remarkable findings of this paper, is that the fund picking process only based on the level of track error from a broad benchmark, can contribute to disappointing results when it is not also accompanied, by information about the fund concentration in multiple market segment. According to previous work, overall we found, that local factor market model provide quite good representation of local average returns for portfolios formed on size, and style factors. Our novel in literature, consists in examining emerging market funds both from the perspective of active management and breath of underlined strategies. More as additional analysis with respect to most of previous paper, we also tested the effects of the crisis that we have found that main result has not affected from it.