RT Journal Article
SR Electronic
T1 Mutual Fund Returns and Their Characteristics: <em>A Simple Approach to Selecting Better Performing Actively-Managed Funds</em>
JF The Journal of Investing
FD Institutional Investor Journals
SP joi.2020.1.117
DO 10.3905/joi.2020.1.117
A1 Burton G. Malkiel
A1 Atanu Saha
YR 2020
UL https://pm-research.com/content/early/2020/02/04/joi.2020.1.117.abstract
AB Using a survivorship bias-free dataset set of over 4,300 actively-managed US equity and international equity funds for the period 2000–2018, we examine whether funds chosen based on various fund characteristics in a given year can yield superior performance the following year. We find that a portfolio of funds chosen based on the combination of characteristics of lowest expense ratio, and lowest turnover and highest Sharpe ratio, generates considerably better future performance than the average actively-managed fund, and the difference in returns is statistically significant.TOPICS: Portfolio theory, portfolio construction, style investing, performance measurementKey Findings• Actively-managed mutual funds with lower expense ratios provide higher returns in the following year.• But considerably better returns are achievable from low-expense funds with low portfolio turnover and high Sharpe ratios.• There is sufficient persistence in cost and risk-control characteristics that investors can obtain better long-run results using the selection criteria proposed.