Thesis (M.A.) from the year 2014 in the subject Business economics - Investment and Finance, grade: 7.5, Maastricht University, language: English, abstract: The following study examines the performance of mutual funds investing in small cap companies in the period from 1990 until 2013. Therefore, funds investing in small companies in Germany are tested on their ability to deliver risk-adjusted abnormal returns. The returns are risk-adjusted according to Fama French (1996) three-factor model, Carhart four-factor model and the liquidity adjusted five-factor model of Pastor and Stambaugh (2003). A separate examination of the internet crisis 2000 until 2003 and the financial crisis period 2008 until 2013 is done, to assess the ability of fund managers in isolation to examine their results in situations when their skills are most needed. On average, I conclude that fund managers, investing in the small capitalization segment in Germany, are not able to outperform the market even before fees.

The original impetus for this research was provided several years ago by a request to assist Counsel for Fidelity Management and Research Corporation in analyzing the mutual fund industry, with particular emphasis on money market mutual funds. We were asked to focus our efforts on the mechanism by which the advisory fees of mutual funds are determined. This request arose out of litigation that challenged the level of advisory fees charged to the shareholders of the Fidelity Cash Reserve Fund. Subsequently, we were asked to provide similar assistance to Counsel for T. Rowe Price Associates regarding the fees charged to shareholders of their Prime Reserve Fund. 1940, advisers of Under the Investment Company Act of mutual funds have a fiduciary duty with respect to the level of fees they may charge a fund's shareholders. Since the passage of the Investment Company Act, there have been numerous lawsuits brought by shareholders alleging that advisory fees were excessive. In these lawsuits, the courts have failed to provide a set of standards for determining when such fees are excessive. Instead, they have relied on arbitrary and frequently ill-defined criteria for jUdging the reasonableness of fees. This failure to apply economic-based tests for evaluating the fee structure of mutual funds provided the motivation for the present book, which undertakes a comprehensive analysis of the economics of the mutual fund industry.

Master's Thesis from the year 2016 in the subject Economics - Finance, grade: 1,3, University of Regensburg (Centre of Finance), language: English, abstract: Financial markets are as complex as ever due to an accelerating development in the last decades. Especially evaluations of mutual fund performance have been a subject of interest since the introduction of financial services. In this thesis, a study on the performance of mutual funds investing in German equity from July 1995 to June 2015 is conducted. The aim is to find out if fund managers have sufficient skill to generate risk adjusted return in order to cover the cost imposed on the investors. Another purpose is to provide investors with relevant results. Inter alia, Jensen one-factor, Fama and French three-factor and the Carhart four-factor model are used as different benchmark models for performance. Paired bootstrap simulations suggest that, net of cost, a small fraction of fund managers do have sufficient skill to cover cost. For the bottom ranked funds, there is statistical evidence that their poor performance is caused by bad management, rather than by bad luck. The results for gross returns show that there is an unneglectable fraction of fund managers with good performance not due to luck. Compared to net returns, there is stronger evidence of skill, negative as well as positive. Form an investor’s point of view it seems rather beneficial to invest in passively managed vehicles. High costs eat into the return, and they are the main reason why the majority of actively managed funds end up with sub-par performance.

The asset management, and more specifically the mutual fund industry, is facing major strategic challenges. Although the market is growing overall, its growth attracts a steady stream of new entrants and new products that jeopardize the position and profitability of (large) incumbent firms. In order to cope with this setting, Andreas Mattig focuses on a holistic market model to sketch the mutual fund industry structure. This allows to propose a new measurement approach and to track the industrial dynamics. Based on these theoretical contributions, he concentrates on governance aspects and moulds the results into a practice-oriented strategic framework.

Inhaltsangabe:Introduction: Measuring performance of fund managers is a topic equally interesting to practitioners and researchers. Most common performance measures rely on the assumption of constant risk during the entire evaluation period. The measure of risk is the beta from the Capital Asset Pricing Model (CAPM). In order to better assess a manager s investment ability, additional factors could be employed to capture the different sources of risk. The manager owes each portion of the achieved return to a certain risk factor. The risks a manager is running can be summed up to form his personal benchmark, which thus reflects the investment style. Still, the exposures to the included risk factors are assumed to be constant. The dynamics of the capital markets had not been captured by the prevailing performance measures before an approach that controlled for varying economic conditions was suggested. Models that are based on this approach deliver a beta conditional on the market state. The manager s exposure to the risk of the own benchmark was thus allowed to vary in time. Consequently, the search for indicators of the market states was launched and a model framework which could accommodate the chosen indicators as part of the benchmark had to be chosen. Two model frameworks emerged and a couple of indicators established themselves as standard. This study largely follows the approach of Ferson and Schadt. They introduced a linear model that can be perceived as a conditional version of the CAPM. The aim of this study is not only to obtain performance measures which result from the conditional models. Since the variation in the exposure to market risk is accounted for, one who employs conditional models gains insight into fund manager s trading. If the trading is reflected in changes of the beta, then inference on fund strategy is made possible even though information on the portfolio structure is not provided. The explanatory power of a conditional model depends on the researcher selecting a representative benchmark for the funds in the sample and indicators of economic conditions that fund managers rely on in reality. The structure of this paper is the following: chapter 2 builds the theoretical foundation of conditional models and presents their two forms; chapter 3 relates this study to previous literature in the area; chapter 4 employs conditional models to evaluate strategies and performance of German fund managers; chapter 5 sums up the [...]