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An examination of ex ante fund performance: identifying indicators of future performance

Author

Listed:
  • Andrew Clare

    (City University of London)

  • Mariana Clare

    (Imperial College)

Abstract

Although there has been a substantial flow of money over the last 20 years into indexed funds and ETFs, the vast majority of equity investment in mutual funds is still being managed on a discretionary basis. In this paper, we investigate whether there exist variables that might be able to give an indication of future superior or inferior benchmark-adjusted active performance. Our results suggest that investors should avoid investing in, or should disinvest from funds that: produce a bottom decile information ratio; produce top decile levels of turnover; experience top decile levels of net inflows; and have top decile levels of fees. We conclude our paper with a suggestion as to how this information might help investors make more informed fund choices.

Suggested Citation

  • Andrew Clare & Mariana Clare, 2019. "An examination of ex ante fund performance: identifying indicators of future performance," Journal of Asset Management, Palgrave Macmillan, vol. 20(3), pages 175-195, May.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:3:d:10.1057_s41260-019-00118-4
    DOI: 10.1057/s41260-019-00118-4
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    More about this item

    Keywords

    Mutual fund performance; Recursive portfolio formation;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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