Management of Investment Funds Financial Fragility

Igor Kravchuk
2019 Montenegrin Journal of Economics  
The aim of the research is to characterize the main factors of in vestment funds financial fragility (concentration, interconnected ness, yield search, homogeneous strategies, procyclical activity, lo substitutability, growth of leverage, low liquidity) in the Euro area Correlation coefficients with different strategies and the stock inde EURO STOXX 50 were used to check the presence of procyclicality o market behavior and homogeneity of investment funds strategie on the example of European
more » ... ple of European hedge funds. In article was proposed t calculate a financial fragility index as a simple average of a leverag multiplier, a liquidity mismatch and an indicator of the intercon nectedness of funds with other financial institutions. The correlatio and regression analysis were applied to identify statistical relation ships between the level of financial fragility of different types o investment funds, as well as with the values of Composite Indicato of Systemic Stress (CISS) in the Euro area and the return of stoc index EURO STOXX50. The results of empirical calculations showe that at the present stage, these investment institutions are charac terized by a generally acceptable level of sensitivity to market fluc tuations. The study found reverse behavior of the equity funds f nancial fragility index in relation to the situation on the stock marke and mainly statistical insignificance of the financial fragility indice correlation of different types of investment funds, as well as wit CISS. The results also indicated that the level of homogeneity o hedge funds and their procyclical behavior in relation to trends i the stock market increases during crisis periods. JEL classification: G15, G23, G30, M16. 18 Current collective investment practices require a network of institutions that determine the specifics of this type of financial activity. Thus, a feature of this investment institutions is the existence of asset managers, who, for appropriate remuneration, manage investment funds on the basis of some investment policy. An asset manager acts as a fiduciary agent (Laurent and Neri, 2015, p. 22; Roncalli and Weisang, 2015, p. 8) and its assets are separated from the assets of the funds, and therefore the risk of asset managers' insolvent does not apply to investors.
doi:10.14254/1800-5845/2019.15-4.2 fatcat:mqatilgpnzb3hdhop37hnys2ey