Portfolio Overlap in the Korean Equity Fund Market

This paper examines portfolio overlap in the Korean mutual fund industry from 2001 to 2018 and its implications to the fund investors. First, the average portfolio overlap among domestic equity funds is 47%, more than four times larger than that of the U.S. mutual fund market. Second, higher overlap funds underperform lower overlap funds during the poorer market condition. Third, there is supporting evidence that Korean investors do not prefer high-overlap funds. Lastly, high-overlap funds charge significantly higher sales and operating fees. The overall evidence suggests that investors may fare better by avoiding high-overlap funds.