Performance Implications of Active Management of Institutional Mutual Funds

Ron Bird, Paolo Pellizzari and Danny Yeung ()

No 13, Working Paper Series from The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney

Abstract: Although mutual fund performance has been dissected from almost every angle, very little attention has been paid to the connection between the actual active decisions made by management and the subsequent performance outcomes. In this paper we use information on institutional mutual funds to examine the implications of their active decisions made with respect to active positions, style and cash holdings for the fund's realised alpha, tracking error and information ratio. We identify some areas where the funds across the entire sample have success (active positions, and growth and winning stock divergences) and many others where they fall short (e.g. value and loser stock divergences). We identify that there is significant variation in these findings when we extend our analysis to examine the impact of these active decisions on performance for different styles of funds during periods of weak and strong markets. Value funds prove to be by far the best in the active positions that they make but losing across the board with their style divergences. Finally, we highlight the importance in style choice on the overall performance of a fund and identify the superiority of the value style over its competitors.

JEL-codes: G11 G14 G29 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-09-01
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Performance implications of active management of institutional mutual funds (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:uts:pwcwps:13

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