The performance of mutual funds: evidence from Turkey

Abstract

In academic world much controversy exists regarding the performance of pension and mutual funds. Some studies have concluded that actively managed funds on average, underperform their passively managed counterparts whereas other studies have shown just the reverse. Another important debate centers on the persistence of under- and over-performance of portfolios. Still evidence from emerging markets which are characterized by high volatility in terms of terms of stock returns is scarce. Hence this study aims to fill this gap in the literature by investigating the persistence of pension and mutual fund performance in Turkey. The results of this study revealed that out of 53 funds one had an abnormal positive risk-adjusted return and one had an abnormal negative risk-adjusted return when the entire six years are taken into consideration. The different measures employed ranked the portfolios similarly and the correlation of the portfolio rankings between consecutive years was close to zero and insignificant. Therefore it is concluded that efforts to form index and intensive stock funds with the expectation of achieving superior performance in the market-place, failed as only a few superior performances were identified, and these were limited to a single period.