Value creation through industry concentrated fund portfolios : an empirical study of the Norwegian fund market
Master thesis
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http://hdl.handle.net/11250/2611322Utgivelsesdato
2019Metadata
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- Master Thesis [4378]
Sammendrag
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.