Abstract
This paper aims to evaluate the performance of South African equity funds between January 2009 and November 2014. This study period overlaps with the study period of quantitative easing during which developing economies in financial markets have been influenced severely. Thanks to the increase in the money supply directed towards the capital markets, a relief was experienced in related markets following the crisis period. During this 5-year 10-month period, in which the relevant quantitative easing continued, Johannesburg Stock Exchange (JSE) yielded approximately %16 compounded on average, per year. In this study, South African equity funds are examined in order to compare these funds' performance within this period.Within this scope- 10 South African equity funds are selected. In order to measure these funds' performances, the Sharpe ratio (1966), Treynor ratio (1965), Jensen's alpha (1968) methods are used. Jensen's alpha is also used in identifying selectivity skills of fund managers. Furthermore, the Treynor & Mazuy (1966) and Henriksson & Merton (1981) regression analysis methods are applied to ascertain the market timing ability of fund managers. Furthermore, Treynor & Mazuy (1966) regression analysis method is applied for market timing ability of fund managers.
Highlights
Mutual fund performance has always been one of the most researched areas of finance studies
The average returns of the Foord Equity Fund, the Coronation Equity Fund, the Sanlam Equity Fund, the Prudential Equity Fund, the Allan Gray Equity Fund, and the Aylett Equity Fund are higher than the Johannesburg Stock Exchange (JSE)
The study period coincides with the quantitative easing (QE) era when stock market sizes have improved remarkably
Summary
Mutual fund performance has always been one of the most researched areas of finance studies. Using diverse technical measurement methods, these types of studies analyze fund performances of various markets from different perspectives. Following the period of liberalization of the financial markets, mutual funds have gained much more significance in the eyes of investors, resulting in numerous studies that have been carried out on performance evaluations. Mutual funds bring investors who share a common goal together. Mutual funds are a suitable investment for the common man, as they provide the opportunity to invest various professionally managed securities at a relatively low cost. The main objective of investing in a mutual fund scheme is to diversify risk. The mutual funds invest in diversified portfolio and the fund managers take different levels of risk so as to achieve the scheme’s objectives. While evaluating and comparing the schemes, the returns should be measured by taking into account the risks involved in achieving the returns. (Rao, 2006)
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