PT  - JOURNAL ARTICLE
AU  - Burton G. Malkiel
AU  - Atanu Saha
TI  - Mutual Fund Returns and Their Characteristics: <em>A Simple Approach to Selecting Better Performing Actively-Managed Funds</em>
AID  - 10.3905/joi.2020.1.117
DP  - 2020 Mar 31
TA  - The Journal of Investing
PG  - 63--75
VI  - 29
IP  - 3
4099  - https://pm-research.com/content/29/3/63.short
4100  - https://pm-research.com/content/29/3/63.full
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, the authors examine whether funds chosen based on various fund characteristics in a given year can yield superior performance the following year. The authors 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 investingKey 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.