INDUSTRY CONCENTRATION AND MUTUAL FUND PERFORMANCE

Marcin Kacperczyk, Clemens Sialm and Lu Zheng

We study the relation between the industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 2003. Our results indicate that the most concentrated funds perform better after controlling for risk and style differences using factor-based performance measures. This finding suggests that investment ability is more evident among managers who hold portfolios concentrated in a few industries.