Performance persistence of equity funds in the Russian stock market

This thesis investigates performance persistence among the equity funds investing in Russia during 2003-2007. Fund performance is measured using several methods including the Jensen alpha, the Fama-French 3- factor alpha, the Sharpe ratio and two of its variations. Moreover, we apply the Bayesian shrinkage estimation in performance measurement and evaluate its usefulness compared with the OLS 3-factor alphas. The pattern of performance persistence is analyzed using the Spearman rank correlation test, cross-sectional regression analysis and stacked return time series. Empirical results indicate that the Bayesian shrinkage estimates may provide better and more accurate estimates of fund performance compared with the OLS 3-factor alphas. Secondly, based on the results it seems that the degree of performance persistence is strongly related to length of the observation period. For the full sample period the results show strong signs of performance reversal whereas for the subperiod analysis the results indicate performance persistence during the most recent years.

Chasing performance persistence of hedge funds

The thesis examines the performance persistence of hedge funds using complement methodologies (namely cross-sectional regressions, quantile portfolio analysis and Spearman rank correlation test). In addition, six performance ranking metrics and six different combinations of selection and holding periods are compared. The data is gathered from HFI and Tremont databases covering over 14,000 hedge funds and time horizon is set from January 1996 to December 2007. The results suggest that there definitely exists performance persistence among hedge funds and the strength and existence of persistence vary among fund styles. The persistence depends on the metrics and combination of selection and prediction period applied. According to the results, the combination of 36-month selection and holding period outperforms other five period combinations in capturing performance persistence within the sample. Furthermore, model-free performance metrics capture persistence more sensitively than model-specific metrics. The study is the first one ever to use MVR as a performance ranking metric, and surprisingly MVR is more sensitive to detect persistence than other performance metrics employed.

‘Driving Forces of Investment Decisions in Mutual Funds’

Unfortunately, in India it is a fact that most of the investors are not interested in mutual funds. Those who are investing, they are investing only very small amounts. But what is important to be noted here is that when compared to other financial instruments, investments in mutual funds are safer and also yields more returns on the investment portfolio. Moreover as an investment avenue mutual fund is available for those investors who are not willing to take any exposure directly in the security market. It also helps such investors to build their wealth over a period of time. At the retail level, investors are unique and are highly heterogeneous, and the mutual fund schemes' selection will also differ depends on their expectations. Hence, investors’ expectation is a very important factor in this regard that needs to be analysed by all the investment houses. Hence, the factors that drive the investment decisions of individual investors to meet their expectations by investing money in mutual funds need an in-depth analysis. These driving forces include the preference of investors on mutual fund compared to various available avenues of financial investments, risk attitude of investors, influence of characteristics of instruments of mutual funds on investors, the investment specific attitudes of investors, and influence of qualities of fund management on investors. The success of any mutual fund, a popular means of investment, depends on how effectively an Asset Management Company has been able to understand the level of influence of these factors on the decision of investors to invest in mutual funds. For a substantial growth in the mutual fund market, there must be a high level precision in the design and marketing of the products of mutual funds taking into account these driving forces by the Asset Management Companies. Therefore, there is a need to conduct a detailed study on investments in mutual funds in this direction. A review of available literature also revealed that no detailed study on mutual funds has so far been attempted in this direction; hence the present study on Driving Forces of Investment Decisions in Mutual Funds is undertaken.

Analyzing the performance of non-listed real estate funds: an panel data analysis

The rapid growth of non-listed real estate funds over the last several years has contributed towards establishing this sector as a major investment vehicle for gaining exposure to commercial real estate. Academic research has not kept up with this development, however, as there are still only a few published studies on non-listed real estate funds. This paper aims to identify the factors driving the total return over a seven-year period. Influential factors tested in our analysis include the weighted underlying direct property returns in each country and sector as well as fund size, investment style gearing and the distribution yield. Furthermore, we analyze the interaction of non-listed real estate funds with the performance of the overall economy and that of competing asset classes and found that lagged GDP growth and stock market returns as well as contemporaneous government bond rates are significant and positive predictors of annual fund performance.

The conditional performance of UK property funds

The evaluation of investment fund performance has been one of the main developments of modern portfolio theory. Most studies employ the technique developed by Jensen (1968) that compares a particular fund's returns to a benchmark portfolio of equal risk. However, the standard measures of fund manager performance are known to suffer from a number of problems in practice. In particular previous studies implicitly assume that the risk level of the portfolio is stationary through the evaluation period. That is unconditional measures of performance do not account for the fact that risk and expected returns may vary with the state of the economy. Therefore many of the problems encountered in previous performance studies reflect the inability of traditional measures to handle the dynamic behaviour of returns. As a consequence Ferson and Schadt (1996) suggest an approach to performance evaluation called conditional performance evaluation which is designed to address this problem. This paper utilises such a conditional measure of performance on a sample of 27 UK property funds, over the period 1987-1998. The results of which suggest that once the time varying nature of the funds beta is corrected for, by the addition of the market indicators, the average fund performance show an improvement over that of the traditional methods of analysis.

Performance drivers of UK unlisted property funds

An unlisted property fund is a private investment vehicle which aims to provide direct property total returns and may also employ financial leverage which will accentuate performance. They have become a far more prevalent institutional property investment conduit since the early 2000’s. Investors have been primarily attracted to them due to the ease of executing a property exposure, both domestically and internationally, and for their diversification benefits given the capital intensive nature of constructing a well diversified commercial property investment portfolio. However, despite their greater prominence there has been little academic research conducted on the performance and risks of unlisted property fund investments. This can be attributed to a paucity of available data and limited time series where it exists. In this study we have made use of a unique dataset of institutional UK unlisted non-listed property funds over the period 2003Q4 to 2011Q4, using a panel modelling framework in order to determine the key factors which impact on fund performance. The sample provided a rich set of unlisted property fund factors including market exposures, direct property characteristics and the level of financial leverage employed. The findings from the panel regression analysis show that a small number of variables are able to account for the performance of unlisted property funds. These variables should be considered by investors when assessing the risk and return of these vehicles. The impact of financial leverage upon the performance of these vehicles through the recent global financial crisis and subsequent UK commercial property market downturn was also studied. The findings indicate a significant asymmetric effect of employing debt finance within unlisted property funds.

Estudo da sensibilidade do fluxo de investimento em fundos multimercado

Este trabalho estuda o impacto causado no fluxo de investimento em fundos multimercado por variáveis como o retorno dos fundos, o retorno do benchmark, a volatilidade de mercado, o fluxo de investimento de estrangeiros na Bolsa de Valores do Estado de São Paulo e o desempenho dos fundos ajustados pelo risco.

Desempenho dos fundos de investimento de ações brasileiro : um estudo do período de 2000 a 2014

O objetivo primário deste trabalho é verificar se os fundos de investimento em ações brasileiros criaram valor, medido pelo alpha de Jensen, dentro do período selecionado. Em seguida, busca-se identificar os fatores determinantes dessa criação de valor. Utilizando a metodologia desenvolvida por Jensen (1968), inicialmente foram separados os fundos que geram alphas significativos dos que não geram. Os benchmarks de mercado utilizados foram Ibovespa e IBRx e as taxas livres de risco foram Taxa Selic, CDI e Poupança. A conclusão foi que os fundos de ações brasileiros, nos períodos estudados, não foram capazes de gerar alpha, independentemente do benchmark ou da taxa livre de risco. No entanto, os resultados foram piores quando comparados com o IBRx. Após esse processo, foi utilizada uma regressão cross section para encontrar quais as variáveis significativas para geração de alpha. Concluiu-se que quanto maior o fundo, maior o alpha gerado. No entanto, quanto mais velho o fundo e quanto maior a taxa de administração menor será o alpha gerado. Por fim, para gestores que geram alphas positivos, cada unidade adicional de risco gera valor e, para gestores com alpha negativo, cada unidade adicional de risco destrói valor

Returns from investing in Australian equity superannuation funds, 1991-1999

In this analysis of investment manager performance, two questions are addressed. First, do managers that actively trade stocks create value for investors? Second, can the multifactor model of Gruber capture the cross-section of average fund returns for the Australian setting? The answers from this study are as follows: as an industry, investment managers destroyed value for superannuation investors for the period 1991 through 1999, under-performing passive portfolio returns by 2.80-4.00 per cent per annum on a risk-unadjusted basis and 0.50-0.93 per cent per annum on a risk-adjusted basis. Evidence is provided in support of the four-factor model of Gruber; however, the model fails to capture the impact of investment style for the Australian setting. The findings suggest that Australian superannuation investors would transform their retirement savings into retirement income more efficiently through the use of passive alternatives to the stock selection problem.

The relationship between exchange rate exposure, currency risk management and performance of international equity funds

This paper assesses the currency risk management policies for a sample of Australian international equity trusts. The relevance of currency risk management is considered in the context of exchange rate exposure and performance measures. The study incorporates differing economic climates and particular emphasis is given to the Asian crisis in mid-1997. Our results indicate that a good proportion of funds do implement specific currency risk management policies. Furthermore, we find that for those funds managing currency risk, there is some evidence of a favourable impact on currency exposure and fund performance.

Selectivity and timing performance of UK investment trusts

This study examines the selectivity and timing performance of 218 UK investment trusts over the period July 1981 to June 2009. We estimate the Treynor and Mazuy (1966) and Henriksson and Merton (1981) models augmented with the size, value, and momentum factors, either under the OLS method adjusted with the Newey-West procedure or under the GARCH(1,1)-in-mean method following the specification of Glosten et al. (1993; hereafter GJR-GARCH-M). We find that the OLS method provides little evidence in favour of the selectivity and timing ability, consistent with previous studies. Interestingly, the GJR-GARCH-M method reverses this result, showing some relatively strong evidence on favourable selectivity ability, particularly for international funds, as well as favourable timing ability, particularly for domestic funds. We conclude that the GJR-GARCH-M method performs better in evaluating fund performance compared with the OLS method and the non-parametric approach, as it essentially accounts for the time-varying characteristics of factor loadings and hence obtains more reliable results, in particular, when the high frequency data, such as the daily returns, are used in the analysis. Our results are robust to various in-sample and out-of-sample tests and have valuable implications for practitioners in making their asset allocation decisions across different fund styles. © 2012 Elsevier B.V.

Neural network DEA for measuring the efficiency of mutual funds

Efficiency in the mutual fund (MF), is one of the issues that has attracted many investors in countries with advanced financial market for many years. Due to the need for frequent study of MF's efficiency in short-term periods, investors need a method that not only has high accuracy, but also high speed. Data envelopment analysis (DEA) is proven to be one of the most widely used methods in the measurement of the efficiency and productivity of decision making units (DMUs). DEA for a large dataset with many inputs/outputs would require huge computer resources in terms of memory and CPU time. This paper uses neural network back-ropagation DEA in measurement of mutual funds efficiency and shows the requirements, in the proposed method, for computer memory and CPU time are far less than that needed by conventional DEA methods and can therefore be a useful tool in measuring the efficiency of a large set of MFs. Copyright © 2014 Inderscience Enterprises Ltd.

Asset Management and Investment Banking

We find evidence that conflicts of interest are pervasive in the asset management business owned by investment banks. Using data from 1990 to 2008, we compare the alphas of mutual funds, hedge funds, and institutional funds operated by investment banks and non-bank conglomerates. We find that, while no difference exists in performance by fund type, being owned by an investment bank reduces alphas by 46 basis points per year in our baseline model. Making lead loans increases alphas, but the dispersion of fees across portfolios decreases alphas. The economic loss is $4.9 billion per year.

What Transaction Costs are Acceptable in Life Insurance Products from the Policyholders' Viewpoint?

Purpose - The purpose of this paper is to analyze what transaction costs are acceptable for customers in different investments. In this study, two life insurance contracts, a mutual fund and a risk-free investment, as alternative investment forms are considered. The first two products under scrutiny are a life insurance investment with a point-to-point capital guarantee and a participating contract with an annual interest rate guarantee and participation in the insurer's surplus. The policyholder assesses the various investment opportunities using different utility measures. For selected types of risk profiles, the utility position and the investor's preference for the various investments are assessed. Based on this analysis, the authors study which cost levels can make all of the products equally rewarding for the investor. Design/methodology/approach - The paper notes the risk-neutral valuation calibration using empirical data utility and performance measurement dynamics underlying: geometric Brownian motion numerical examples via Monte Carlo simulation. Findings - In the first step, the financial performance of the various saving opportunities under different assumptions of the investor's utility measurement is studied. In the second step, the authors calculate the level of transaction costs that are allowed in the various products to make all of the investment opportunities equally rewarding from the investor's point of view. A comparison of these results with transaction costs that are common in the market shows that insurance companies must be careful with respect to the level of transaction costs that they pass on to their customers to provide attractive payoff distributions. Originality/value - To the best of the authors' knowledge, their research question - i.e. which transaction costs for life insurance products would be acceptable from the customer's point of view - has not been studied in the above described context so far.