![]() ![]() It is crucial to note that however flawed the PTR is as a time horizon estimate, it is the only widely available data point. Common criticisms of the PTR include that it provides a flat transaction estimate that does not consider liquidity issues, fund strategy, round trip trades, non-equity asset classes, or rare fund events. My findings are only meaningful, however, to the extent that the PTR is a reasonably good estimate of mutual fund time horizons-a conclusion that was not certain at the start of the project. Strength of the PTR as a Proxy for Time Horizons In other words, mutual fund investment time horizons are short, but not getting shorter. Between 2005–2015, the average mutual fund PTR was 79 percent, which is in sharp contrast to 26 percent in 1945 and 45 percent in 1975, but lower than estimates from the early 2000’s of 100 to 110 percent. My findings do not undercut the claim that mutual fund time horizons are short they are consistently shorter than historical figures. The average holding period for all funds was in the range of 15 to 17 months, with expected increases for index funds and decreases for other asset classes. First, how long, on average, do mutual funds hold onto their assets? Second, how good of a measure is the PTR at approximating mutual fund holding patterns? Average Mutual Fund Portfolio Turnover Ratios 2005-2015Īs to the first question, I find that despite significant fluctuation following the 2008 financial crisis, from 2005–2015, mutual funds’ investment time horizons did not decrease. ![]() With my dataset, I contribute to two foundational inquiries. If mutual funds do focus on the short term, their behavior should show up in current and reliable data. mutual funds’ reported portfolio turnover ratios (PTR)-one measure of investment time horizon. In a new project, The Long and The Short: Portfolio Turnover Ratios & Mutual Fund Investment Time Horizons, I take neither side in the short-termism debate, but contribute an analysis of 2005-2015 data on U.S. Its proponents, on the other hand, highlight short-term investors’ ability to unlock firm value and counter corporate management’s long-term bias. As such, short-termism is a contagion that can spread from funds to firms. mutual funds, as significant investors, are preoccupied with quarterly earnings, which feeds the quarterly anxiety of corporate boards of directors. Short-termism is a loaded phrase in debates over investment time horizons, often used to criticize investors and corporate managers deemed overly focused on near-term gains at the expense of long-term value. ![]()
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