Does performance persistence exist in mutual and pension funds? Evidence from Turkey

  • Received September 22, 2021;
    Accepted November 25, 2021;
    Published December 7, 2021
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.18(4).2021.27
  • Article Info
    Volume 18 2021, Issue #4, pp. 326-339
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This work is licensed under a Creative Commons Attribution 4.0 International License

The objective of this study is to investigate the performance persistence of Turkish mutual and pension funds. 310 mutual and 259 pension funds were analyzed between the period of 2010–2019 in order to determine if there is an evidence of performance persistence. In this study, a persistence rate is developed, and the skill ratio is used to crosscheck the results of the persistence rate. Furthermore, six different risk-adjusted return measures, such as Sharpe, Treynor, Information, Jensen’s alpha, Sortino, and Omega ratios are calculated to analyze whether funds also exhibit superior risk-adjusted returns. The results indicate that only 2% of funds demonstrate persistence above 50%, and 15 out of 20 fund categories do not have any funds that show persistence in 10 years. Most of the persistent funds have positive skill ratios, and it is observed that the persistence rate is effective. However, it cannot be stated that there is performance persistence in the Turkish fund management industry, since performance persistence is not evident for various fund types, so investors do not need to invest in the best funds of the previous year. Additionally, the empirical results associated with risk-adjusted performance analysis indicate that persistent funds also do not generally yield higher risk-adjusted returns. The lack of persistence in funds’ performance is a significant result for investors in their investment decisions, for fund managers in their human resource policies and bonus schemes, and for regulators in their policy decisions.

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    • Figure 1. Histogram of persistence rate in mutual funds
    • Figure 2. Histogram of persistence rate in pension funds
    • Table 1. Categories of both mutual and pension funds
    • Table 2. Defined category benchmarks
    • Table 3. Summary statistics of persistence rates in mutual funds
    • Table 4. Persistence rate of funds in each mutual fund category
    • Table 5. Mutual funds persistent in performance
    • Table 6. Performance measures of persistent mutual funds
    • Table 7. Skill ratios of persistent mutual funds
    • Table 8. Summary statistics of persistence rates in pension funds
    • Table 9. Pension funds persistent in performance
    • Table 10. Performance measures of persistent pension funds
    • Table 11. Skill ratios of persistent pension funds
    • Table 12. Persistence rate of funds in each pension fund category
    • Table 13. Summary of persistence analysis
    • Conceptualization
      Tayfun Ozkan, Hakki Ozturk
    • Data curation
      Tayfun Ozkan
    • Formal Analysis
      Tayfun Ozkan, Hakki Ozturk
    • Investigation
      Tayfun Ozkan
    • Methodology
      Tayfun Ozkan, Hakki Ozturk
    • Resources
      Tayfun Ozkan, Hakki Ozturk
    • Software
      Tayfun Ozkan, Hakki Ozturk
    • Visualization
      Tayfun Ozkan
    • Writing – original draft
      Tayfun Ozkan
    • Supervision
      Hakki Ozturk
    • Validation
      Hakki Ozturk
    • Writing – review & editing
      Hakki Ozturk