Abstract

This study examines whether small & mid cap fund performance is related to the characteristics of fund managers, such as gender, tenure, investment experience, education (MBA) and professional training (CFA). Applying statistical tests which consider fund performance, risk and expenses simultaneously, we find that some systematic cross-sectional differences in fund performance can be attributed to differences in manager characteristics. Female managers are less willing to take risks in making investment decisions, while mid cap funds managed by men have low turnover and expense ratios, thereby delivering greater performance. Interestingly, MBAs can't out-perform those without. Better risk-adjusted performance can be expected from funds that are of small asset size. Hence, we also obtain the optimal size of managed mutual funds, which is US$1.43 billion from single index alpha equation, and US$3.89 billion from multi-index alpha equation. There are 88 percent of funds in our sample smaller than the optimal size of US$1.43 billion and 96 percent smaller than the optimal size of US $3.89 billion. Investors can avoid high risk by selecting low turnover, and small capitalization funds managed by fund managers who are female with less investment experience and with CFA degree, all else equal. In terms of expense and turnover, managers with MBAs and CFAs have lower rates of expenses. However, those with longer tenure and investment experience generate higher expense ratio. High turnover ratios are associated with female manager of shorter investment experience and CFA designation.