Leaving the (Fund) Gate Ajar: Investor Protection or Marketing Ploy?

Hu, W; Lam, P; Lee, A

Leaving the (Fund) Gate Ajar: Investor Protection or Marketing Ploy?

Hu, W Lam, P Lee, A

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Publisher:: Elsevier
Publication Type:: Conference Proceeding
Citation:: Pacific Basin Finance Journal, 2021, 83, pp. 102227
Issue Date:: 2021-07-04

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Field	Value	Language
dc.contributor.author	Hu, W
dc.contributor.author	Lam, P
dc.contributor.author	Lee, A
dc.date	2021-07-04
dc.date.accessioned	2024-08-14T05:52:45Z
dc.date.available	2024-08-14T05:52:45Z
dc.date.issued	2021-07-04
dc.identifier.citation	Pacific Basin Finance Journal, 2021, 83, pp. 102227
dc.identifier.issn	0927-538X
dc.identifier.uri	http://hdl.handle.net/10453/180407
dc.description.abstract	Using a sample of active equity funds in China, we explore for the first time mutual funds that impose discretionary inflow restrictions (gates) on investors. Contrary to managers' claim, we find no compelling evidence that inflow gates serve to protect investor interests. Despite their superior past performance, inflow-restricted funds exhibit a significant decline in subsequent returns. In addition, funds tilt toward a riskier investment strategy when a gate is in place. Our analyses reveal that partly-closed gates further exacerbate investors' chasing of past returns, attracting extra flows and locking in more retail investors. Overall, we suggest that leaving the fund gate ajar to investors appears to be more of a marketing ploy than a form of investor protection. Our findings carry important implications for mutual fund investors, asset managers, and policy makers alike.
dc.language	en
dc.publisher	Elsevier
dc.relation.ispartof	Pacific Basin Finance Journal
dc.relation.ispartof	Asian Finance Association Annual Conference
dc.relation.isbasedon	10.1016/j.pacfin.2023.102227
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment
dc.subject.classification	Finance
dc.subject.classification	3502 Banking, finance and investment
dc.title	Leaving the (Fund) Gate Ajar: Investor Protection or Marketing Ploy?
dc.type	Conference Proceeding
utslib.citation.volume	83
utslib.location.activity	Asian Finance Association Annual Conference
utslib.for	1501 Accounting, Auditing and Accountability
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
pubs.organisational-group	University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	open_access	*
pubs.consider-herdc	false
dc.rights.license	This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0). To view a copy of this license, visit https://creativecommons.org/licenses/by/4.0/
dc.date.updated	2024-08-14T05:52:44Z
pubs.finish-date	2021-07-04
pubs.publication-status	Accepted
pubs.start-date	2021-07-04
pubs.volume	83

Abstract:

Using a sample of active equity funds in China, we explore for the first time mutual funds that impose discretionary inflow restrictions (gates) on investors. Contrary to managers' claim, we find no compelling evidence that inflow gates serve to protect investor interests. Despite their superior past performance, inflow-restricted funds exhibit a significant decline in subsequent returns. In addition, funds tilt toward a riskier investment strategy when a gate is in place. Our analyses reveal that partly-closed gates further exacerbate investors' chasing of past returns, attracting extra flows and locking in more retail investors. Overall, we suggest that leaving the fund gate ajar to investors appears to be more of a marketing ploy than a form of investor protection. Our findings carry important implications for mutual fund investors, asset managers, and policy makers alike.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/180407