South African unit trust performance and strategy in a changing economic climate (1989–2002)

Abstract

Previous studies show that interest rates, dividend yields and other commonly available variables are useful market indicators. Although this has produced new insights into asset pricing models, it has not been applied to the measurement of South African unit trust funds' performance. This study introduces a set of predetermined variables into the measures of performance of South African unit trust fund managers. Following Ferson and Schadt (1996), classical performance measures are modified to incorporate market indicators. The performance and strategy of seven South African general equity unit trust managers are evaluated over the period 1989 to 2002. The predetermined variables are both statistically and economically significant. It is concluded that when the conditional measures are applied to this sample of unit trusts, their performance improves. No evidence of market timing strategy is demonstrated under a conditional approach.