2001年-世界发展银行全球_Mutual_Fund_Investment_in_Emerging_Markets___An_Overview_26页_681kb

Mutual Fund Investment in Emerging Markets: An Overview

Core Content

This article provides an overview of mutual fund investment in emerging markets, highlighting their role in capital flows, asset allocation, and behavior during financial crises. The authors—Graciela L. Kaminsky, Richard K. Lyons, and Sergio L. Schmukler—analyze data at both the fund-manager and fund-investor levels to understand the dynamics of mutual fund activity in these markets.

Main Points

• Role of Mutual Funds: International mutual funds are key contributors to the globalization of financial markets and major sources of capital flows to emerging economies. They are particularly important in the context of portfolio investment, which includes bonds and equities.

• Instability of Flows: Mutual fund flows are not stable and are prone to large redemptions and injections, especially during financial crises. This instability is linked to the phenomenon of financial contagion, where crises spread rapidly across countries.

• Crises in the 1990s: The financial crises of the 1990s, such as the Mexican crisis (1994), the Thai crisis (1997), and the Russian crisis (1998), were characterized by their rapid cross-border spread. The 1998 Russian crisis had a global impact, affecting even developed economies like Germany, the United States, and the United Kingdom.

• Data Challenges: Unlike other institutional investors (e.g., pension funds, hedge funds), mutual funds provide more transparent data due to their regular reporting to the U.S. SEC and private data providers. This allows for both cross-sectional and time-series analysis.

• Portfolio Characteristics: Mutual funds have a strong home bias, with a significant portion of their assets invested in domestic markets. However, they also play a major role in international investment, particularly in emerging markets, with some funds specializing in these regions.

• Growth and Concentration: The mutual fund industry in emerging markets has grown substantially, with a large share of assets concentrated in a few key markets. For example, at least half of their total portfolio is invested in six major markets: Brazil, Hong Kong (China), Republic of Korea, Malaysia, Mexico, and Taiwan (China).

• Global vs. Dedicated Funds: While the article focuses on dedicated emerging market funds, it notes that global funds also hold a significant portion of emerging market assets. These global funds have a larger overall impact due to their size, even though they allocate a smaller share of their assets to emerging markets.

• Impact on Emerging Markets: Despite the relatively small proportion of their assets invested in emerging markets, mutual funds have a strong presence in these economies due to the limited size of local capital markets. They hold a large share of publicly traded equity in these markets.

Key Information

• Capital Flows: Private capital flows have become the main source of external financing for developing countries, accounting for about 80% of all flows. These flows have been volatile, with booms followed by sharp reversals, especially during crises.

• Mutual Fund Size: In 1995, U.S. institutional investors held nearly $11 trillion in assets, with mutual funds accounting for 59% of U.S.-based international institutional investors' assets.

• Emerging Market Holdings: Dedicated emerging market mutual funds held $77 billion in Asia at the onset of the 1997 crisis. In Latin America, holdings increased from $21.5 billion in 1995 to $23.2 billion in 1998.

• Transition Economies: Mutual fund investment in transition economies has grown rapidly, with countries like the Czech Republic, Hungary, Poland, Russia, and the Slovak Republic being major recipients.

• Behavior During Crises: Mutual fund investment in emerging markets tends to be volatile during crises, with large withdrawals observed. This behavior may be influenced by institutional panic and herding, where fund managers are forced to sell assets due to redemptions.

• Market Capitalization: Mutual funds hold a substantial share of market capitalization in emerging markets, with some funds accounting for up to 15% of the U.S. market capitalization in 1996.

Summary Table

Conclusion

Mutual funds have become a significant and volatile source of capital flows to emerging markets. Their behavior during crises is closely linked to financial contagion and institutional panic, which can exacerbate market instability. The article emphasizes the need for further research on mutual fund investment strategies and their broader implications for financial stability in emerging economies.