Do manager characteristics matter in equity mutual fund performance? New evidence based on the double-adjusted alpha

Numerous studies investigate the relationships between fund manager characteristics and fund performance. However, most evaluate fund performance by using traditional factor alphas, such as the Fama–French–Carhart four- and six-factor alphas. In the present study, we analyze data from Taiwanese equity mutual funds from January 2009 to December 2018 and reevaluate the relationships between fund manager characteristics (namely gender, education level, and tenure) and fund performance by using a recently proposed performance measure: the double-adjusted alpha. Double-adjusted alphas reflect fund manager skill more accurately than do the traditional four- or six-factor alphas because they control for returns attributable to fund holding characteristics. In contrast to the fact that team management has become the dominant management structure in the U.S. recently, domestic mutual funds in Taiwan are all managed by solo managers, and one manager can manage more than one fund. This solitary working environment in Taiwan's domestic fund industry motivates us to re-examine the relationship between fund performance and characteristics of these solitary managers at the manager level but through using the recently developed double-adjusted alpha method. Our results indicate that female fund managers tend to achieve higher double-adjusted alphas than do male competitors, with the difference remaining significant over the 1, 6, and 12 months following the initial ranking month. Managers' education level and tenure do not have any statistically significant effect on either the double-adjusted four- or six-factor alpha values. However, using the traditional factor alpha measures would lead to different and misleading results. In contrast to the current literature, our findings provide new insights into the relationships between fund manager characteristics and fund performance.