Performance and Persistence of Performance
of Actively Managed U.S. Funds
that Invest in International Equity

Abstract

This study analyzes the abnormal performance of actively managed U.S.-domiciled funds that mainly invest in international stocks over the period 1992–2011. Despite extraordinary growth in the number and flow of funds into international funds, only a handful of studies are available to explain the performance and persistence of performance of these funds. Moreover, findings on the performance of international funds are mixed, at best. This study finds that active management does possess selectivity skills. On the basis of risk-adjusted performance, the majority of international funds outperform their passive benchmarks. Persistence of performance is observed in few categories of international funds, and there are a number of categories where investors can earn superior returns by following contrarian strategies. Finally, this study offers trading strategies to retail investors who seek to invest in international funds.