Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance
UNSW Working Paper No. 2004-13
45 Pages Posted: 25 Jan 2005
Date Written: January 19, 2005
We examine the performance and portfolio characteristics of actively managed equity funds impacted by top management turnover. Utilizing a unique database of monthly portfolio holdings, our study finds that post-replacement, previously poor performing funds experience improved returns. However this improved performance is not attributable to superior stock selection skill. We also find these new managers decrease the fund's reliance on momentum strategies and decrease the portfolio's concentration, which then leads to a reduced tracking error volatility. Prior to the replacement event, underperforming investment managers exhibit preferences for larger, growth-oriented stocks, as well as riding momentum strategies and increasing portfolio turnover.
Keywords: Top management turnover, portfolio holdings, fund performance
JEL Classification: G23
Suggested Citation: Suggested Citation