Article Preview

Performance evaluation of actively managed mutual funds


Boikanyo Kenneth Malefo
M.Sc., Ph.D. candidate, School of Business and Finance, Faculty of Economic and Management Sciences, University of the Western Cape, South Africa
,
Heng-Hsing Hsieh
Professor, Ph.D., CFA is the Deputy Dean (Research) and Associate Professor, Faculty of Economic and Management Sciences at the University of the Western Cape, South Africa
,
Kathleen Hodnett
Ph.D., Associate Professor, Faculty of Economic and Management Sciences at the University of the Western Cape, South Africa
. (29 DEC 2016).


doi: http://dx.doi.org/10.21511/imfi.13(4-1).2016.04

Abstract
Motivated by the growing attraction of the mutual fund industry worldwide, this research seeks to explore the economic benefits contributed by the South African equity unit trust managers over the period from 6 January 2002 to 2 September 2012. The performance statistics of selected equity unit trusts are examined for the overall examination period and two sub-periods: 6 January 2002 to 6 May 2007 and 7 May 2007 to 2 September 2012. The first sub-period captures the bullish performance of the unit trusts before the 2008 global financial crisis. The second sub-period captures the global financial crisis and the European debt crisis before the European Central Bank (ECB) subsequently implemented the outright monetary transactions (OMT) to curb the yields in Eurozone. The risk-adjusted performance measures employed by this study include the Sharpe ratio, M-squared, Treynor measure and Jensens alpha. Regardless of the different applications of risk-return parameters employed to evaluate fund performance, the results reveal that, on average, most of the equity unit trust managers in South Africa do not outperform the market proxy on a consistent basis. The majority of the unit trust managers show good performance before the crisis, with subsequent inferiority in performance in turbulent times.

Keywords: unit trusts, active portfolio management, passive portfolio management, performance evaluation, efficient market hypothesis (EMH).
JEL Classification: G11, G12, G14, G15.