Determinants of non-compliant equity funds with EU portfolio concentration limits

https://doi.org/10.1016/j.mulfin.2021.100707Get rights and content
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Highlights

  • Supervisors should monitor concentrated fund markets with concentrated benchmarks.

  • The oldest equity funds that are solo-managed should be screened by supervisors.

  • Supervisors should examine fund holdings on large-cap stocks with low volatility.

Abstract

This study identifies the determinants of domestic equity funds that fail to comply with the portfolio concentration limits of the EU Directive 2009/65/EC. This study also determines the characteristics of the stocks subject to these non-compliant portfolios. The empirical application to a comprehensive sample of domestic equity funds registered in the Eurozone provides significant information that can help to improve market supervision in terms of investors’ protection.

JEL classification

G11
G18
G23

Keywords

EU directives
Portfolio concentration limits
Domestic equity funds
Eurozone benchmarks

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