Advertisement

The Usual Suspects: Timescales, Strategies and Constraints of Emerging Market Asset Managers

  • Javier Santiso
Chapter
  • 40 Downloads
Part of the The CERI Series in International Relations and Political Economy book series (CERI)

Abstract

Fund managers play a fundamental role in the confidence game. They allocate assets around the world, investing in firms’ stocks or countries’ bonds. In this confidence game with its financial crises, they are the usual suspects, frequently accused of being short-termist. By the time of the Asian crisis, for example, concerns arose about offshore funds (the so-called hedge funds) and their impact on financial market volatility.1 In fact the results of research are mixed, underlining above all that offshore funds are not especially worrisome monsters herding more than onshore funds during a crisis.2 In the same way, as underlined by previous researches, using large sample data on closed end country funds, foreign investors don’t tend to move out of a country when there is imminent crisis ahead before domestic fund managers.3 Because they are better informed, local investors tend infact to move quicker than foreign investors. Different types of investors tend to behave differently. This is the case for individual versus institutional investors or local versus international. It is therefore misleading to lump all investors, or even all foreign investors, into one single basket. Individual foreign investors, due to lack of information, tend to herd more than institutional foreign investors, and nonresident investors tend to herd more than resident ones.4

Keywords

Mutual Fund Pension Fund Hedge Fund Fund Manager Asset Manager 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

  1. 1.
    See Woochan Kim and Shang Jin Wei, “Offshore Investment Funds: Monsters in Emerging Markets?” Harvard University Center for International Development, CID Working Paper No. 69, June 2001 (unpublished).Google Scholar
  2. 2.
    See Woochan Kim, “Foreign Portfolio Investors Before and During a Crisis,” Journal of International Economics, 56 (1), 2002, pp. 77–96.CrossRefGoogle Scholar
  3. 7.
    See Sergio Schmukler, Richard Lyons and Graciela Kaminsky, “Managers, Investors and Crises: Mutual Fund Strategies in Emerging Markets,” World Bank Working Paper December 1999 (unpublished).CrossRefGoogle Scholar
  4. 10.
    See Manmohan S. Kumar and Avinash Persaud, “Pure Contagion and Investor’s Shifting Risk Appetite: Analytical Issues and Empirical Evidence,” IMF Working Paper, No. 134, September 2001.Google Scholar
  5. 11.
    Robert Shiller,“Stock Prices and Social Dynamics,” Brookings Papers on Economic Activity Review 2, 1984, pp. 457–498; Robert Shiller, “Speculative Prices and Popular Models,” Journal of Economic Perspectives 4, 1990, pp. 55–65CrossRefGoogle Scholar
  6. Robert Shiller, “Speculative Prices and Popular Models,” Journal of Economic Perspectives 4, 1990, pp. 55–65CrossRefGoogle Scholar
  7. Robert Shiller, “Conversation, Information and Herd Behavior,” American Economic Review, 85, 2000, pp. 181–185.Google Scholar
  8. 12.
    David Hirshleifer and Tyler Shumway, “Good Day Sunshine: Stock Returns and the Weather,” University of Michigan Business School March 2001 (unpublished).Google Scholar
  9. 19.
    See Guillermo Calvo and Enrique Mendoza, “Rational Contagion and the Globalization of Securities Markets,” Journal of International Economics vol. 51, no. 1, 1999, pp. 79–113.CrossRefGoogle Scholar
  10. 21.
    See Pits Disyatat and Gaston Gelos,“The Asset Allocation of Emerging Market Mutual Funds,” IMF Working Paper No. 111, August 2001.Google Scholar
  11. 22.
    Mohamed A. El-Erian, “The Long and Winding Road,” PIMCO Emerging Markets Watch, October 2000.Google Scholar
  12. 39.
    Paul Myners, Institutional Investment in the United Kingdom: A Review, London, UK HM Treasury, 2001.Google Scholar
  13. 40.
    See Morgan Stanley Dean Witter, “LatStrat Monday Comment: MSCI—Changing Its Spots?” New York, Morgan Stanley Dean Witter, July 31, 2001.Google Scholar
  14. 41.
    Calculated from Goldman Sachs, Global Emerging Market Strategist, New York, Goldman Sachs, June 6, 2001Google Scholar
  15. 43.
    Goldman Sachs, “Pension and Mutual Funds and Their Impact on Stock Markets,” New York, Goldman Sachs, Latin America Portfolio Strategy, August 31, 2001.Google Scholar
  16. 44.
    See William Mercer, European Pension Fund Managers Guide 2001 /2002—Latest Developments in Institutional Fund Management, London, William Mercer, 2001.Google Scholar
  17. 59.
    Sylvia Maxfield, “Effects of International Portfolio Flows on Government Policy Choice,” in Miles Kahler, ed., Capital Flows and Financial Crisis, Manchester, Manchester University Press, 1998, pp. 69–92.Google Scholar
  18. 64.
    Brad Barber, Terrance Odean and Lu Zheng, “The Behavior of Mutual Fund Investors,” September 2000 (unpublished working paper).Google Scholar
  19. 72.
    See Randolph B. Cohen, Brian J. Hall and Luis Viceira, “Do Executive Stock Options Encourage Risk-Takings?”, Harvard University Graduate School of Business Administration March 2000 (unpublished).Google Scholar
  20. See Brian Hall and Jeffrey Leibman, “Are CEOs Really Paid Like Bureaucrats?” Quarterly Journal of Economics, 1998, 113 (3), pp. 653–691CrossRefGoogle Scholar
  21. Joseph Haubrich,“Risk-Aversion, Performance Pay and the Principal Agent Problem,” Journal of Political Economy 102(2), 1994, pp. 258–276.CrossRefGoogle Scholar
  22. 73.
    See Edwin J. Elton, Martin J. Gruber and Christophe R. Blake, “Incentive Fees and Mutual Funds,” New York University Working Paper June 2001 (unpublished).Google Scholar
  23. 74.
    Jennifer Carpenter, “Does Option Compensation Increase Managerial Risk Appetite?” Journal of Finance, 55, 2000, pp. 2311–2331CrossRefGoogle Scholar
  24. Jennifer Chevalier and Glenn Ellison, “Risk Taking by Mutual Funds as a Response to Incentives,” Journal of Political Economy, 105, 1997, pp. 1167–1200.CrossRefGoogle Scholar

Copyright information

© Javier Santiso 2003

Authors and Affiliations

  • Javier Santiso

There are no affiliations available

Personalised recommendations