Performance and investment styles of international multi‑asset funds during market crises

• Autor(a) principal: Leite, Paulo
• Data de Publicação: 2024
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
• Texto Completo: http://hdl.handle.net/11110/2983; https://doi.org/Leite, P. (2024). Performance and investment styles of International multi‑asset funds during market crises. Empirica, 1-23. https://doi.org/10.1007/s10663-024-09614-2.
• topic: Multi-asset funds; Mutual fund performance; Market crises; Multifactor models; Conditional models

This paper presents a comprehensive investigation into the performance of multiasset funds investing internationally. Based on a custom-built conditional multifactor model, which includes several bond and equity-related factors, along with time-varying betas and alphas, we show that funds in our dataset significantly underperform from 2004 to 2021. This evidence holds even on a before-fee basis, with funds investing predominantly in bonds exhibiting significantly higher alphas than funds investing predominantly in equities. Since multi-asset funds may better hedge against market downturns than equity or bond funds, given their higher asset class diversification, we also evaluate performance for crisis and non-crisis phases separately. The results show that, during market crises, international multi-asset funds perform significantly better than in non-crisis times, achieving neutral performance. However, while funds that favour bond investments perform similarly across different market phases, funds that prioritize equity investments perform significantly better during crises. Consequently, multi-asset funds with higher bond holdings can be a better option during non-crisis periods, while funds with higher equity holdings should be preferred during market downturns. This somewhat puzzling finding seems to be related to funds’ cash holdings. By providing a better understanding of the asset allocation decisions of international mutual fund managers, as well as of their impact on fund performance, this work has meaningful implications for investors.