Value creation through industry concentrated fund portfolios : an empirical study of the Norwegian fund market
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- Master Thesis 
Although financial theory recommends investors to diversify their holdings across industries to reduce their overall unsystematic risk, some fund managers hold their portfolios concentrated in specific industries. This thesis study the relation between the industry concentration and the performance of actively managed Norwegian equity funds in the period from 2006 through 2017. By dividing funds into portfolios by their industry concentration, we analyze whether fund managers can create value by concentrating their portfolios in specific industries. Overall, we find that Norwegian equity funds, on average, perform better than a comparable benchmark but in lack of statistical evidence, we cannot conclude whether they are able to cover their costs. Furthermore, our results are in contrast with previous literature and indicate that funds with diversified portfolios achieve higher gross returns than funds with concentrated portfolios after controlling for risk using various models and performance measurements. The difference is higher when looking at net returns, as more concentrated funds charge higher management fees. These findings indicate that investment ability is more evident among Norwegian managers who hold their portfolios diversified between industries.