NZFC - Corporate Governance in Mutual Funds: The Impact of Holdings Disclosure
ESG, Corporate Finance
Country or region:
Portfolio holdings disclosure has been a controversial issue for many years; SEC disclosure requirements in the US were relaxed from quarterly to semi-annual in 1985, then in 2004 returned to a quarterly mandate. Even today, some countries do not require holdings to be disclosed, and some are considering changing their laws to make it compulsory; New Zealand has made this change for KiwiSaver funds, and Australia is considering it. Further, in the US, there are current discussions about whether hedge funds should come under increased scrutiny, and be subject to more disclosure. In the last few years there have been several papers examining various aspects of the impact of disclosure – front-running, copycat trading, and reporting lag, in addition to the simple return performance differential. Most of these studies have either examined the before and after 2004 SEC rule change, or compare SEC disclosure vs. another disclosure mechanism. Our study examines the impact on fund return of disclosure in two ways. First, there are two markets where disclosure is not required but some funds choose to disclose – Australia and New Zealand. Second, in New Zealand in 2013 KiwiSaver funds became required to disclose top holding. The first affords us a natural experiment to compare funds that disclose with those that do not, and the second allows us to compare the same funds before and after the disclosure requirement. Based on some preliminary examinations and an earlier version of this paper, we expect to find, contrary to arguments against disclosure, that returns are not harmed by disclosure.
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