Beta or duration? Risk-taking by balanced mutual funds in Korea✰

Keun Woo Park, Min Yeon Han and Ji Yeol Jimmy Oh

Finance Research Letters, 2020, vol. 33, issue C

Abstract: We examine the risk-taking behavior of balanced mandate managers in Korea between 2011 and 2018. Though it is well known that mutual fund managers face risk-taking incentives after poor performance, balanced mandate managers are unique in that they can choose between whether to take risks in either equities and/or bonds. We find that, following poor relative performance, bond-oriented balanced funds increase their systematic exposure to equities, while “reaching for duration” is confined to equity-oriented managers. Managers thus appear to increase risks in an asset category with a relatively lower portfolio weight. Systematic risk-taking attracts inflows but harms risk-adjusted performance.

Keywords: Hybrid mutual funds; Holding beta; Holding duration; Fund performance (search for similar items in EconPapers)
JEL-codes: E52 E58 G14 G23 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319302697

DOI: 10.1016/j.frl.2019.07.002

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