In this paper, I study effect of mutual fund portfolio concentration on performance using Korean fund data.Consistent with agency view,I find that fund performance deteriorates after portfolio concentration increases.Additional tests confirm that the main driving force of this negative relationship between the two stems from agency behavior of fund managers. Negative concentration – performance relation becomes more pronouncedwhen the past quarter market return is high, in the time when compensation incentive is more important than employment incentive. Similarly, poor fund governance also strengthen this negative relation. Interaction effects of concentration and badfund governance on future fund alpha are significantly negative. Overall, my results are in sharp contrast to the evidence from advanced economy such as U.S. and Australia,implying that in the emerging economy such as Korea, high portfolio concentrationcould harm investor wealth.​

Keywords :Portfolio Concentration;Focused fund; Mutual fund; fund peformance;Agency conflict;fund governance; fund family governance
JEL Classification :G11, G14, G20​