The relation between management fees and the mutual funds` performance in Poland in 2015

Research background: The investor`s expectation of better performance in the case of more expensive mutual funds seems natural and fully justified. However, the rise of passive funds and their surprisingly good results, especially when taking into account their low fees, triggered the discussion. Recent years have brought more and more studies, conducted mostly for the American market, discrediting high-charging, aggressive funds. First analyses in Poland also indicate that the level of fees is not always linked with the fund’s performance. Purpose of the article: The purpose of the study is to investigate the relation be-tween the fees imposed by the mutual funds and the funds` performance. The idea is to verify, whether higher management fees are associated with top performance and whether it is rational to pay more for capital management. Methods: In the first step of the study, linearity and direction of the dependency was explored, using scatterplots and correlation analysis. In the second part, the linear regression was created to verify the strength of the relation. One-factor models have been built with the rate of return and standard deviation as independent variables for 1-, 3- and 5-year time horizons. Moreover, two-factor models, including both rate of return and risk has been created, to compare the significance of return and risk factor. Findings & Value added: The results indicated that more expensive Polish mutual funds in 2015 tended to perform worse in all tested time horizons — both in terms of lower rates of return and higher risk. Especially unexpected are the results of rates of return regression analysis — it turns out that within a sample 1% higher fee implied over 0.6% lower rate of return before fees (in yearly period). Nonetheless, the risk turned out to be more important, explaining the charges variability much better than the rate of return. Another interesting finding of the study is that merely two simple factors (return and risk) explain even as much as 60% of the management fee variability.

Download Full-text

Investment funds as a form of effective pension protection in an aging society

Scientific Journal of the Military University of Land Forces ◽

10.5604/01.3001.0014.0271 ◽

2020 ◽

Vol 195 (1) ◽

pp. 171-182

Author(s):

Agnieszka Parkitna ◽

Małgorzata Pol ◽

Rafał Miśko ◽

Marzena Pura

Keyword(s):

Standard Deviation ◽

Mutual Funds ◽

Stock Exchange ◽

Test Sample ◽

Rate Of Return ◽

Rates Of Return ◽

Investment Funds ◽

Aging Society ◽

Independent Analysis ◽

Selection Of

The article aimed to analyze the effectiveness of investment funds and to create a ranking of investment funds with the highest economic efficiency. The scope of selection of the test sample is presented. The effectiveness of investment funds was assessed using various measures of their assessment. Comparing the obtained rates of return and risk, measured with a standard deviation, with the rate of return from the stock exchange, the most profitable funds were selected. As a result, it has been shown that the desire to invest in mutual funds does not have to end with investing in those that seem viable, but independent analysis can be done.

Download Full-text

ECONOMIC VALUE ADDED VERSUS RISK IN AGRICULTURAL COMPANIES – INTERACTIONS AND CAUSES OF THEIR OCCURRENCES

Annals of the Polish Association of Agricultural and Agribusiness Economists ◽

10.5604/01.3001.0010.3267 ◽

2017 ◽

Vol XIX (3) ◽

pp. 301-307

Author(s):

Serhiy Zabolotnyy

Keyword(s):

Economic Value ◽

Value Added ◽

Negative Influence ◽

Rate Of Return ◽

Fixed Cost ◽

Economic Value Added ◽

Gross Margin ◽

Rates Of Return ◽

Operating Profit ◽

Versus Risk

The goal of the research is to present relations between the ability to generate value and risk in agribusiness companies. The ability to generate value of analyzed entities was determined using a rate of return on invested capital expressed by economic value addend (EVA). To characterize the risk of business indicators of operating and financial leverage were used. In periods of higher leverage lower rates of return on invested capital were noticed. The main reason for growth of the degree of leverage was an increase in the share of fixed cost in gross margin along with a decrease of operating profit. This gave an evidence of a negative influence of risk expressed by leverage on ability to generate value in agribusiness companies.

Download Full-text

Discount Rates for Nonindustrial Private Forest Landowners in Mississippi: How High a Hurdle?

Southern Journal of Applied Forestry ◽

10.1093/sjaf/26.1.26 ◽

2002 ◽

Vol 26 (1) ◽

pp. 26-31 ◽

Cited By ~ 20

Author(s):

Steven H. Bullard ◽

John E. Gunter ◽

Max L. Doolittle ◽

Kathryn G. Arano

Keyword(s):

Mutual Funds ◽

Rate Of Return ◽

Private Forest ◽

Discount Rates ◽

Rates Of Return ◽

Forest Landowners ◽

Forestry Investments ◽

Hurdle Rates ◽

Nonindustrial Private Forest ◽

Private Forest Landowners

Abstract Mississippi forest landowners were surveyed to determine average discount rates or “hurdle rates”—the lowest rates of return they consider acceptable—for 3 nonforestry investments, and for 5, 15, and 25 yr forestry investments. The survey included 829 individuals who owned at least 20 ac of uncultivated land and had harvested timber during a recent 5 yr period; survey results are therefore oriented toward commercially active forest landowners. On average, the private nonindustrial forest landowners included in the survey expect timberland investments to earn higher rates of compound interest than relatively low-risk bank savings accounts and certificates of deposit. Relatively short-term (5 yr) timberland investments, however, have lower minimum rates of return than stocks, bonds, and mutual funds. With forestry investments, all else equal, Mississippi nonindustrial private forest landowners prefer shorter time periods—average hurdle rates in nominal terms before taxes were 8.0% for forestry investments lasting 5 yr, 11.3% for those lasting 15 yr, and 13.1% for those lasting 25 yr. Household income significantly influenced the lowest rate of return considered acceptable for 5 yr forestry investments—the rate was 9% for landowners with annual incomes above $50,000 and 7.4% for landowners with annual incomes below $50,000. On a hurdle rate basis, higher income private landowners in Mississippi generally find forestry investments lasting 15 yr to be competitive with stocks, bonds, and mutual funds. However, Mississippi landowners' 13.1% required rate of return for 25 yr forestry investments was higher than the rate considered acceptable for the other investments included in the survey. Reforestation tax incentives, cost-shares, and related public policies that reduce the front-end costs incurred by NIPF landowners tend to increase the projected rate of return for relatively long-term reforestation investments. South. J. Appl. For. 26(1):26–31.

Download Full-text

Long-Term Sustainable Investment for Retirement

Sustainability ◽

10.3390/su13095000 ◽

2021 ◽

Vol 13 (9) ◽

pp. 5000

Author(s):

Iqbal Owadally ◽

Jean-René Mwizere ◽

Neema Kalidas ◽

Kalyanie Murugesu ◽

Muhammad Kashif

Keyword(s):

Mutual Funds ◽

Performance Metrics ◽

Retirement Income ◽

Retirement Plans ◽

Full Account ◽

Investment Performance ◽

Management Fees ◽

Sustainable Investment ◽

Managed Funds

We consider whether sustainable investment can deliver performance comparable to conventional investment in investors’ long-term retirement plans. On the capital markets, sustainable investment can be achieved through various instruments and strategies, one of them being investment in mutual funds that subscribe to ESG (environmental, social, and governance) principles. First, we compare the investment performance of ESG funds with matched conventional funds over the period 1994–2020, in Europe and the U.S. We find no significant evidence of differing performance (at 5% level) despite using a number of investment performance metrics. Second, we perform a historical backtest to model a UK personal retirement plan from 2000 till 2020, taking full account of investment management fees and transaction costs. We find that investing in an index-tracker fund overlaid with ESG screening delivers a pension which is 10.4% larger than is achieved if the index-tracker fund is used without screening. This is also 20.2% larger than is achieved by investing in a collection of actively managed funds with a sustainable purpose. We conclude that an ESG-screened long-term passive investment approach for retirement plans is likely to be successful in satisfying the twin objectives of a secure retirement income and of sustainability.

Download Full-text

Choosing Factors for the Vietnamese Stock Market

Journal of Risk and Financial Management ◽

10.3390/jrfm14030096 ◽

2021 ◽

Vol 14 (3) ◽

pp. 96

Author(s):

Nina Ryan ◽

Xinfeng Ruan ◽

Jin E. Zhang ◽

Jing A. Zhang

Keyword(s):

Stock Returns ◽

Factor Model ◽

Five Factor Model ◽

Explanatory Power ◽

Factor Models ◽

Marginal Contribution ◽

Return On Equity ◽

Factor Modeling ◽

Three Factor ◽

Better Than

In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model has more explanatory power than the FF three-factor model. The value factor remains important after the inclusion of profitability and investment factors. Operating profitability performs better than cash and return-on-equity (ROE) profitability as a proxy for the profitability factor in FF factor modeling. The value factor and operating profitability have the biggest marginal contribution to a maximum squared Sharpe ratio for the five-factor model factors, highlighting the value factor (HML) non-redundancy in describing stock returns in Vietnam.

Download Full-text

On the Meaning of Internal Rates of Return and Why an Internal Rate of Return is Not an Investment Criterion

SSRN Electronic Journal ◽

10.2139/ssrn.1634819 ◽

2010 ◽

Cited By ~ 1

Author(s):

Michael J. Osborne

Keyword(s):

Rate Of Return ◽

Internal Rate Of Return ◽

Rates Of Return ◽

Internal Rate ◽

Investment Criterion

Download Full-text

Performance of Portfolios Based on the Expected Utility-Entropy Fund Rating Approach

Entropy ◽

10.3390/e23040481 ◽

2021 ◽

Vol 23 (4) ◽

pp. 481

Author(s):

Daniel Chiew ◽

Judy Qiu ◽

Sirimon Treepongkaruna ◽

Jiping Yang ◽

Chenxiao Shi

Keyword(s):

Mutual Funds ◽

Portfolio Selection ◽

Expected Utility ◽

Decision Model ◽

Risky Choice ◽

Numerical Representation ◽

Better Than ◽

The Eu

Yang and Qiu proposed and reframed an expected utility–entropy (EU-E) based decision model. Later on, a similar numerical representation for a risky choice was axiomatically developed by Luce et al. under the condition of segregation. Recently, we established a fund rating approach based on the EU-E decision model and Morningstar ratings. In this paper, we apply the approach to US mutual funds and construct portfolios using the best rating funds. Furthermore, we evaluate the performance of the fund ratings based on the EU-E decision model against Morningstar ratings by examining the performance of the three models in portfolio selection. The conclusions show that portfolios constructed using the ratings based on the EU-E models with moderate tradeoff coefficients perform better than those constructed using Morningstar. The conclusion is robust to different rebalancing intervals.

Download Full-text