Modeling Overlapped Mutual Funds’ Portfolios: A Bipartite Network Approach

This paper studies the topology of the Chilean mutual fund industry using networks methods. With the physical positions of the local equity portfolios managed during 2003.01-2017.4, we analyze their connectivity structure in both the mutual funds’ bipartite network and their one-mode projection. We estimate network measures to examine the potential effects on the topology arising from changes in the industrial environment and changes in the mutual funds’ investment strategies in their overlapped portfolios.

Our main results show that changes in the bipartite network and its one-mode projection are correlated with variables related to funds’ investment strategies and with industry-specific variables. In consequence, these elements are a new potential of disturbance in the financial network conformed by stocks and mutual funds.

We contribute to the existing literature, improving the understanding of the aggregate behavior of a financial sector which despite its economic importance has attracted little attention from a systemic risk perspective.