Fund Manager Skill in an Era of Globalization: Offshore Concentration and Mutual Fund Performance

76 Pages Posted: 27 Feb 2020 Last revised: 18 Jun 2021

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Yuehua Tang

University of Florida - Department of Finance

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

H. Zafer Yuksel

Texas A&M University Corpus Christi

Date Written: June 17, 2021

Abstract

We use textual analysis to construct a measure that captures a mutual fund’s offshore exposure concentration through holding U.S. multinational firms. We find that funds with a higher offshore concentration index (OCI) perform significantly better, with the difference in four-factor alpha between the top and bottom deciles amounting to 2.95% per annum. Fund managers’ overweighing of firms with operations in certain countries can be partly attributed to their foreign ethnicity. High OCI fund managers have an information edge regarding firms’ fundamentals such as earnings. Overall, fund managers have country-specific expertise and specialization, which is an important source of fund alpha in an era of globalization.

Keywords: Mutual Funds, Manager Skill, Offshore Concentration, Fund Performance, Multinational Firms, Textual Analysis

JEL Classification: G11, G23, J24

Suggested Citation

Bai, John (Jianqiu) and Tang, Yuehua and Wan, Chi and Yuksel, H. Zafer, Fund Manager Skill in an Era of Globalization: Offshore Concentration and Mutual Fund Performance (June 17, 2021). Available at SSRN: https://ssrn.com/abstract=3544394 or http://dx.doi.org/10.2139/ssrn.3544394

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business ( email )

220 B RP
Boston, MA 02115
United States

Yuehua Tang (Contact Author)

University of Florida - Department of Finance ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/yuehuatang

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

H. Zafer Yuksel

Texas A&M University Corpus Christi ( email )

6300 ocean drive
corpus christi, TX TX 78414
United States

HOME PAGE: http://https://cob.tamucc.edu/About_Us/faculty_staff_directory.html

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