Abstract: Fund investment has increasingly become an important part of China's family financial assets. Using the daily return data of mutual funds in China from 2005 to 2021, the paper applies Benford's Law to test the existence of net value management behavior of mutual funds. The empirical results show that compared to ETF fund, the nonzero first-digit distribution of other equity funds' daily returns is more likely against Benford's law, thus proving the existence of net value management behavior. Further, when the fund's portfolio is less independent with other funds belonging to the same fund management company, the first-digit distribution of the fund's daily return is less likely to follow the Benford's law, indicating that concentrated investment can be a way to meet net value management targets. Finally, the more away the net value return of the fund is from Benford's law, the higher growth and lower volatility the net value of the fund will keep in the current period, showing an effect of ‘killing two birds with one stone’ in multiple management goals, but the two will reverse in the next period. The paper contributes to the screening and supervision of net value management behavior of mutual funds, and also helps investors to make more scientific investment decisions.

Key words: mutual fund, net value management, Benford's law, portfolio independence, volatility