Human capital efficiency, performance, market, and volatility timing of asian equity funds during COVID-19 outbreak

Despite its relevance for financial services, the impact of human capital efficiency on mutual fund performance has remained unexplored. In this paper, we attempt to explore this gap in the context of the outbreak of COVID-19 that provides us a unique opportunity to assess human capital's importance during economic pressures. We employ data on 2044 equity funds across sixteen COVID-19 affected Asian countries to analyze the performance, market, and volatility timing after sorting these funds as per their human capital efficiency. Our results show that funds with better human capital efficiency outperform their counterparts that rank lower on human capital efficiency. The outperformance as measured by adjusted Sharpe and Sortino’s ratios, Jensen’s alpha, stochastic dominance, market, and volatility timing remained consistent for the pre-COVID period as well as through the outbreak during which the impact of human capital efficiency became even more significant. These findings have important strategic implications for mutual funds.

The impact of human capital efficiency on Latin American mutual funds during Covid-19 outbreak.

The mutual funds' returns, inter alia, are dependent on fund managers' performance. This makes human capital efficiency very central for consistent risk-adjusted performance. The persistence in performance becomes more critical during periods of high turbulence, like the one we are experiencing amidst the outbreak of Covid-19. In this research, we attempt to evaluate the performance of equity funds in massively impacted Latin American countries. These equity funds, with 95% of their investment in the infected region, are ranked as per their human capital efficiency using 2019 as the base year. Our findings demonstrate that funds with higher human capital efficiency significantly outperform their counterparts that rank lower on human capital efficiency. These findings remained consistent for the sub-periods that we specify to map the evolution of Covid-19. We conclude that equity funds should enhance their human capital efficiency to endure resilience amid macroeconomic shocks.