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UK fund returns and sector diversification

Aneel Keswani (), David Stolin () and Maxim Zagonov ()
Additional contact information
Aneel Keswani: Cass Business School
David Stolin: University of Toulouse, Toulouse Business School
Maxim Zagonov: University of Toulouse, Toulouse Business School

Economics Bulletin, 2016, vol. 36, issue 1, pages 10-21

Abstract: We examine the performance of UK equity mutual funds relative to the simple passive alternative of equal sector-weighting. While it has often been reported that only a minority of funds beat the market index, such funds are nonetheless numerous, and many investors have been drawn to active management in the hope that they can spot these funds (Gruber 1996). By contrast, we show that few if any funds outperform equal weighting of industry sectors in the post-1987 period. Our results significantly increase the burden of proof on active equity fund managers wishing to convince investors that they can outperform passive strategies, and introduce an easy to implement passive alternative for would-be investors in such funds.

Keywords: mutual funds; factor models; smart beta; diversification return (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2016-02-04
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