Measuring Market Power in the Spanish Mutual Funds Industry for Retail Investors

Managerial Ability, Risk Preferences and the Incentives for Active Management

“…This difference may be the consequence of two effects, separately or in combination. The first effect comes from the lack of competition in the Spanish mutual fund market, as documented in Cambon and Losada (2014) and Losada (2015). Nevertheless, there is evidence that the competition is stronger in the equity mutual funds niche, where there are more competing independent management companies.…”

“…The most evident factor is that the U.S. investors may enjoy more talent from their management companies. This may be the consequence of a low degree of competition in the Spanish mutual funds market as stated in Cambon and Losada (2014) and Losada (2015). The management companies may not compete in ability.…”

“…The management companies may not compete in ability. As stated in Losada (2015), they may compete in less aggressive dimensions as a result of offering a wide variety of funds. 20 The other reason may be found in the characteristics of the equity markets that the analyzed funds invest in, mainly the Spanish equity market and the European market for blue chips.…”

“…The key structural parameters of interest were the manager's ability, the risk aversion coefficient, and the pay for performance sensitivity of the compensation contracts. As stated in Cambon and Losada (2014) and Losada (2015), within the Spanish market, in most of the segments of the mutual fund industry, the management companies that belong to credit institutions enjoy market power. It was also established that this type of management companies enjoy the least market power in the equity segment.…”

Managerial Ability, Risk Preferences and the Incentives for Active Management

“…This variable has been defined as in Gavazza (2011),Cambon and Losada (2014) andLosada (2015). It is assumed that investors invest over a time horizon of seven years 17.…”