The relative persistence in performance of South African Unit Trusts

Date
2014-01-21
Authors
Midgley, Mark
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Abstract
A considerable amount of research has been undertaken in South Africa and internationally to ascertain whether unit trust funds have outperformed their respective benchmarks and if fund managers have been able to achieve persistently superior returns for the investors. This research is aimed at determining whether there is persistence in performance of unit trust funds within South Africa over the periods of June 1988 to January 2013 and investigates the ability of unit trusts to retain their ranks as a winner or loser from one period to the next. Based on a review of available literature on persistence in performance of unit trust funds, two research questions were formulated as part of this study. Firstly, the research aims to determine whether or not persistence in performance exists in South African unit trusts and secondly whether persistence in performance exists in unit trusts relative to a style risk-adjustment benchmark over a period of time. The population tested for this study consists of all the actively managed South African equity funds over a 24-year period. A computer model was used to develop a fund trading strategy for Winner- and Loser-only unit trusts funds, using monthly fund price data sourced from I-Net Bridge. The results of the computer simulation yielded a fund trading strategy which defined the optimum portfolio size, look-back (L) period and holding (H) period to maximise fund performance. The study showed that unit trust funds were able to outperform the benchmark and in most cases were able to outperform the market. In general, winner-only funds tended to outperform loser-only funds. In summary, the research concluded that persistence in performance exists in South African Unit Trusts, and that these funds are able to outperform style riskadjustment benchmark over a period of time.
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MBA thesis
Keywords
Unit trusts , Johannesburg Securities Exchange
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