Does performance persistence exist in mutual and pension funds? Evidence from Turkey

The objective of this study is to investigate the performance persistence of Turkish mutual and pension funds. 310 mutual and 259 pension funds were analyzed between the period of 2010–2019 in order to determine if there is an evidence of performance persistence. In this study, a persistence rate is developed, and the skill ratio is used to crosscheck the results of the persistence rate. Furthermore, six different risk-adjusted return measures, such as Sharpe, Treynor, Information, Jensen’s alpha, Sortino, and Omega ratios are calculated to analyze whether funds also exhibit superior risk-adjusted returns. The results indicate that only 2% of funds demonstrate persistence above 50%, and 15 out of 20 fund categories do not have any funds that show persistence in 10 years. Most of the persistent funds have positive skill ratios, and it is observed that the persistence rate is effective. However, it cannot be stated that there is performance persistence in the Turkish fund management industry, since performance persistence is not evident for various fund types, so investors do not need to invest in the best funds of the previous year. Additionally, the empirical results associated with risk-adjusted performance analysis indicate that persistent funds also do not generally yield higher risk-adjusted returns. The lack of persistence in funds’ performance is a significant result for investors in their investment decisions, for fund managers in their human resource policies and bonus schemes, and for regulators in their policy decisions.

Manipulation and performance persistence: an examination of Iranian equity mutual fund performance

Purpose This paper aims to study manipulation and performance persistence in equity mutual funds. To this end, Manipulation-Proof Performance Measure (MPPM) and Doubt Ratio, along with a number of current performance measures are used to evaluate the performance of equity mutual funds in Iran. Design/methodology/approach The authors investigate performance manipulation by 1) comparing the results of the MPPM with the current performance measures, 2) checking the Doubt Ratio to detect suspicious funds. Additionally, the authors investigate performance persistence by forming and evaluating portfolios of the equity mutual funds at several time horizons. Findings The authors conclude that there is no evidence of performance manipulation in the equity mutual funds. Additionally, when comparing the performance of the upper (top) tertile portfolios and the lower tertile portfolios, in all of the studied 1, 3, 6 and 12-month horizons, the authors find performance persistence in the equity mutual funds. Originality/value To the best of the authors’ knowledge, this research is the first study to investigate the performance manipulation in the Iranian equity mutual funds, and also is the first study in Iran that uses the MPPM and the Doubt Ratio in addition to a number of current performance measures to investigate the performance persistence in the equity mutual funds at several time horizons.

Quasi-hedge funds market in Poland in view of their performance persistence

Performance persistence analysis is important as it has a decisive influence on investor allocation decisions. Investors can use quasi-hedge funds’ persistence to build effective investment strategies. Thus, the paper explores performance persistence of quasi-hedge funds operating at the Polish capital market. The methodology is based on constructing the new market performance index intended only for absolute return funds. It is validated regarding absolute returns of Polish quasi-hedge funds. The Absolute Return Index (ARI) is used to rate quasi-hedge funds’ performance persistence in assessing their fundamental purpose: to deliver consistently positive returns in all market conditions. For this, their quarterly return rates are used. All 53 funds operating for at least 36 months and representing 48.2% of the entire segment of absolute return funds are analyzed. The use of ARI allows examining quasi-hedge funds’ performance persistence in terms of market changes and the assessment of their purpose. In the short term (6 months) profitability remained persistent, while in the long term (12 months) such a hypothesis could be refuted. More than 40% of funds showed positive persistence within six months; only positive persistence occurred in the short term. 9.4% of funds repeatedly obtained negative returns, so absolute return funds’ negative performance persisted neither in the short nor long term. Closed-ended investment funds showed much stronger persistence of above-average positive returns, which additionally tended to avoid repeating negative returns in two-quarter and four-quarter series. This confirms the assumption that in this respect the Polish market is similar to the developed ones.

Persistent Blessings of Luck: Theory and an Application to Venture Capital

Persistent performance in venture capital is routinely interpreted as evidence for skill. We present a dynamic model of delegated investment with endogenous fund heterogeneity and deal flow, which generates performance persistence without skill differences and predicts mean reversion in long-term performance. Investors working with multiple funds use contingent payments and tiered contracts to induce proper project nurturing and managerial effort. Successful funds receive continuation contracts that tolerate investment failure and encourage innovation, and subsequently finance entrepreneurs through a path-dependent assortative matching favoring incumbents. Recent empirical findings corroborate the models general implications, and the economic mechanisms are robust to short-term contracting, endogenous bargaining, and double moral hazard issues.