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A Strategic Management Perspective of Fund Family Competition: Theories and Evidence from America and China

Description

Since the 2008 financial crisis, the total assets managed by U.S. mutual funds have frequently hit new highs and the industry has become increasingly concentrated. In the meantime, two strategies

Since the 2008 financial crisis, the total assets managed by U.S. mutual funds have frequently hit new highs and the industry has become increasingly concentrated. In the meantime, two strategies have emerged in the American mutual fund industry: active and passive management. What factors affect the market shares of firms that adopted these two different strategies?

Building on strategic management theories, I suggest that mutual fund families that adopted active and passive management strategies tend to compete in different dimensions. Active management fund families tend to implement the product differentiation strategy, competing on “product quality” through excess-returns, innovative and differentiated fund products; passively managed fund families focus more on "price competition" by conducting an overall cost leadership strategy.

This research examines the driven factors of fund families’ market share. The results show that: the market share of actively managed fund families is more sensitive to positive impact of fund performance, while passive management firms are more sensitive to negative effect of management fees and total loads; 12b-1 expense improves the competitiveness of active fund families and thus enhance their market shares but it has negative impact on passive fund families. In addition, high turnover decreases the market share of all fund families, especially for passively managed families. The outcome reveals the latest US mutual industry orientation: products differentiation, turnover, management fee have greater impact on market share while the competition of fund performance is diminishing. The Matthew effect in US mutual fund industry is outstanding. Industrial competition dimension expands from performance and products to cost cutting.

Empirical analysis on Chinese mutual fund families is also conducted. Different from the US, there is only small number of mutual fund families targeting passive management products. The results show that the distribution channel has the largest impact on Chinese mutual fund family market share and investors are more willing to chase performance than to consider cost-efficient fund families. This study then analyses reasons behind the difference of Chinese and American mutual fund industries.

Contributors

Agent

Created

Date Created
  • 2018

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DB 2020: analyzing and forecasting DB market trends

Description

Over the last two decades, Alternative Project Delivery Methods (APDM), such as Design-Build (DB), have become more popular in the construction industry, specifically in the U.S., and the competition for

Over the last two decades, Alternative Project Delivery Methods (APDM), such as Design-Build (DB), have become more popular in the construction industry, specifically in the U.S., and the competition for APDM projects has risen among construction companies. The Engineering News Record (ENR) magazine analyzes DB firms and publishes the list of the top 100 every year. According to ENR articles and many scientific papers, the implementation of DB method has grown drastically over the last decade, however, information about growth trends depending on firm size and segment is lacking. Also missing is knowledge the future market trends over the next five years. Furthermore, public agencies and DB firms may be worried that DB projects do not distribute wealth equally among DB firms. Using the top 100 firms deemed representative of the DB market, the author has divided the market into volumes based on rankings to analyze the total DB market revenue growth. A comparison between international and domestic revenues indicated that the top five DB firms have 64% more involvement in the international market compared to the domestic market. Furthermore, while the research shows increasing market share only for the top five firms, the author has found that (1) a large portion of their market share is due to a large growth in their international market, and (2) revenues for all volumes of the DB market have increased. Moreover, regression and time series analyses allow for the forecasting of the DB market growth, which the author anticipate to move from about $100B to about $150B in 2020.

Contributors

Agent

Created

Date Created
  • 2014