Investigating the sources of performance in South African general equity unit trusts

Abstract

ABSTRACTThe objective of this study is to analyse the sources of performance in South African domestic equity unit trusts during the period 2002 to 2011. The study was based on Sharpe's (1992) study of the asset allocation of mutual funds in the United State s (US). Five sectors were selected to determine returns due to sector allocation: large-cap resources stocks, large-cap industrial stocks, large-cap financial stocks, mid-cap stocks and small-cap stocks.The study shows that a large part of active returns was due to sector allocation in the case of general and growth equity unit trusts. The contribution of stock selection was negative in most cases. However, in the case of value unit trusts the converse is true. It was also observed that sector allocations were modified frequently in the case of the top-performing unit trusts to capitalize on the relative performance of the different major sectors from time to time.