| Abstrakt: |
Purpose: The authors examine the performance of individual global equity funds in Central and Eastern Europe (CEE) and separate the skill of their fund managers from luck. Design/methodology/approach: The authors use cross-sectional bootstrap simulations to study the monthly net and gross returns of 175 funds over the period September 2005 to December 2019. Simulations are applied to three, four, and five-factor asset pricing models, and to regressions run on fund-specific benchmark indexes. The authors also examine the value added by all funds and by fund size groups. Findings: Using multifactor models, a majority of the individual funds fail to deliver alpha, both net and gross of fees; whereas, most of the negative alphas appear due to poor skills, not bad luck. Relative to benchmark indexes, about 5% of the sample shows skill only gross of fees, indicating that fund management fees absorb this skill. As a whole, global equity funds in CEE add more economic value than they destroy, gross of fees, which is largely driven by large funds. Practical implications: Market-tracking passive indexes are the most reliable choice for investors who want to maximise their risk-adjusted returns at the lowest possible cost. However, investors with a high level of risk appetite might prefer small actively managed funds in CEE when market conditions are stable or growing. Investors who are less risk tolerant might prefer large actively managed funds. Originality/value: This is the first study to shed light on the presence of skill in mutual fund returns in CEE. [ABSTRACT FROM AUTHOR] |
