Mutual fund shareholdings and performance: A network perspective

Abstract

Mutual fund shareholdings build up complex relations between funds and can impact fund performance as well. We focus on the Chinese mutual fund market to examine the relationship between mutual fund shareholdings and performance. Specifically, we describe the complex shareholding relations from a network perspective and investigate the effect of the shareholding network on fund performance. Our results indicate that the fund performance is positively related to its centrality in the shareholding network. This performance enhancing effect can be attributed to informational channels through which the funds in more central positions can possibly improve their performance. Further analyses show that the central positions tend to provide more access to firm-specific information (access effect), influence the holding behaviours of non-central funds (transmission effect) and improve information disclosure quality (quality effect). These findings offer regulatory agencies and fund investors an alternative perspective for assessing the role and performance of mutual funds in the capital market.