The effect of industry concentration on equity mutual funds' performance

Equity mutual funds is the rank first in the world in terms of managed monetary size among open-end mutual fund types, and it is continuing to develop in Turkey as well. Analyzing the effect of industry distribution of stocks in the portfolios of equity mutual funds on fund performance is important in terms of contributing to the development of investment strategies of individual and institutional investors, as well as examining the difference in return created by taking risks about business and about the industry in portfolio management. Data set of this study consists quarterly price data and portfolio distribution reports of 28 equity intensive funds investing only in domestically traded stocks between the years 2016-2021. Logarithmic return, Sharpe ratio and Jensen alpha were used to measure the performance of the funds. The percentage weights of the stocks in the portfolios of the funds and the industries of the stock issuers were classified according to the information obtained from the portfolio distribution reports, and the ICI and HHI concentration criteria were calculated. According to the findings obtained as a result of the study, the industry intensiveness by investing more in certain industries and the diversification of the portfolio with different stocks in the same industry, increased the performance of equity intensive funds. In the first part, portfolio theories in the context of portfolio management are explained and risk types are given, then mutual fund, which is one of the examples of portfolio concept in practice, has been examined in various aspects. In the second part, performance measurement methods which are mainly used in mutual funds and concentration criteria are introduced. The last section contains the results of the analysis for equity intensive funds.