Abstract
Although there has been a substantial flow of money over the last twenty years into index tracking funds and ETFs, the vast majority of equity investment in mutual funds is still being managed on an active, discretionary basis. In the US and the UK active management still accounts for around 75% of equity mutual fund holdings. In this paper we investigate whether there exist variables that might be able to give an indication of future superior or inferior benchmark-adjusted active fund returns. Our results suggest that investors should avoid investing in, or should dis-invest from funds that produce a low information ratio, have high turnover or where the fund experiences high net inflows.
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