DOI: http://doi.org/10.15350/2409-7616.2022.2.31

UDC 336.767

Sorokina M.M.¹ (Novosibirsk, Russian Federation) – E-mail: m40ina@mail.ru, Deduyshko E.I.¹ (Novosibirsk, Russian Federation) – E-mail: elena.deduyshko@mail.ru

¹Novosibirsk state University of Economics and Management

Abstract. The article analyzes foreign and Russian methodological approaches to assessing the effectiveness of active management of mutual funds. The paper attempts to revise traditional views on the effective management of mutual funds by analyzing the research of foreign and Russian authors. The conventional wisdom about actively managed mutual funds states that, on average, active management has little value for investors. This belief is based on three main conclusions: profitability does not significantly exceed fees, no one guarantees stable profitability of the fund and the skills of managers do not exceed the costs that an investor pays for servicing an actively managed mutual investment fund. The purpose of the article is to study the value of active management of mutual funds for the Russian market. Foreign studies of the twenty-first century show that managers of active mutual funds have significant skills that create real value for investors and persist over time. According to the methodological approaches considered in the paper, the majority of actively managed funds in Russia do not win the market. In fact, research shows that very few actively managed funds deliver higher returns than benchmarks over long periods of time, including with impressive short-term performance indicators. As a result of the analysis, the Russian market of mutual funds at the current stage of development is characterized by a low value of active fund management for an investor from the point of view of the literature reviewed.

Keywords: mutual fund, value, efficiency, active management, passive management.

References:

1. Abramov A.E., Radygin A.D., Chernova M.I. Efficiency in Portfolio Management of Equity Funds and Methods of Its Evaluation. Economic policy, 2019, vol. 14, no. 4, pp. 8-47. (In Russian). DOI:10.18288/1994-5124-2019-4-8-47
2. Abramov A.E., Radygin A.D., Chernova M.I. Pricing models of shares of Russian companies and their practical application. Voprosy Ekonomiki, 2019, vol. 3, pp. 48-76. (In Russian). DOI: 10.32609/0042-8736-2019-3-48-76
3. Galanova A.V., Dukova V.V. Determinants of mutual funds performance. Corporate Finance, 2018, vol. 12, no. 4, pp. 43-60. (In Russian). DOI:10.17323/j.jcfr.2073-0438.12.4.2018.43-60
4. Inozemtsev E.V., Tarassov E.B. Actively managed Russian mutualfunds: Good or bad for investors? Voprosy Ekonomiki, 2018, vol. 3, pp. 64-79. (In Russian). DOI: 10.32609/0042-8736-2018-3-64-79
5. Parshakov P. Estimation of skill of Russian mutual fund managers. Applied econometrics, 2015, vol. 37, no. 1, pp. 57-66. (In Russian). URL: https://www.elibrary.ru/item.asp?id=23217501
6. Teplova T.V., Sokolova T.V., Fasano A., Rodina V.A. Determinants of return rates of russian equity and bond mutual funds: active investment strategies and commissions. Voprosy Ekonomiki, 2020, vol. 9, pp. 40-60. (In Russian) DOI: 10.32609/0042-8736-2020-9-40-60
7. Alexander G., Cici G., Gibson S. Does motivation matter when assessing trade performance? An analysis of mutual funds. Review of Financial Studies, 2007, vol. 20, pp. 125-150. DOI:10.2139/ssrn.641743
8. Brinson G.P., Hood R., Beebower G. Determinants of Portfolio Performance. Financial Analysts Journal, 1986, vol. 42, no. 4, pp. 39-44.
9. Carhart M. On persistence in mutual fund performance. Journal of Finance, 1997, vol. 52, pp. 57-82. DOI: https://doi.org/10.2307/2329556
10. Bidisha C., Moulton P., Trzcinka C. The performance of short-term institutional trades. Journal of Financial and Quantitative Analysis, 2017, vol. 52, pp. 1403-1428. DOI: https://doi.org/10.1017/S0022109017000400
11. Ippolito R. Efficiency with costly information: A study of mutual fund performance. Quarterly Journal of Economics, 1984, vol. 104, pp.1-23. DOI: https://doi.org/10.2307/2937832
12. Fama E., French K. Luck versus skill in the cross-section of mutual fund performance. Journal of Finance, 2010, 65, vol. pp. 1915-1947. DOI: https://doi.org/10.1111/j.1540-6261.2010.01598.x
13. Fulkerson J., Riley T. Portfolio concentration and mutual fund performance. Journal of Empirical Finance, 2019, vol. 51, pp. 1-16. DOI: 10.1016/j.jempfin.2019.01.006
14. Glode V. Why mutual funds “underperform. Journal of Financial Economics, 2011, vol. 99, pp. 546-559.
15. Gruber M. Another puzzle: The growth of actively managed mutual funds. Journal of Finance, 1996, vol. 51, pp. 783-801. DOI: https://doi.org/10.1111/j.1540-6261.1996.tb02707.x
16. Gupta-Mukherjee S. When active fund managers deviate from their peers: Implications for fund performance. Journal of Banking & Finance, 2013, vol. 37, pp. 1286-1305. DOI: https://doi.org/10.1016/j.jbankfin.2012.12.003
17. Jensen M. The performance of mutual funds in the period 1945-1964. Journal of Finance, 1968, vol. 23, pp. 389-416.
18. Malkiel B. Returns from investing in equity mutual funds 1971 to 1991. Journal of Finance, 1995, vol. 50, pp. 549-572. DOI: https://doi.org/10.1111/j.1540-6261.1995.tb04795.x
19. Pedersen L. Sharpening the arithmetic of active management. Financial Analysts Journal, 2018, vol. 74, pp. 21-36. DOI: http://dx.doi.org/10.2139/ssrn.2849071
20. Rohleder M., Schulte D., Syryca J. Mutual fund stock-picking skill: New evidence from valuation- versus liquidity-motivated trading. Financial Management, forthcoming, 2018, vol. 47(2). DOI:10.1111/fima.12198
21. Sharpe W. The arithmetic of active management. Financial Analysts Journal, 1991. vol. 47, pp. 7-9.
22. Sharpe W. The arithmetic of investment expenses. Financial Analysts Journal, 2013. vol. 69, pp. 34-41
23. Wermers R. Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses. Journal of Finance, 2000, vol. 55, pp. 1655-1695.
24. Wermers R., Yao T., Zhao J. Forecasting stock returns through an efficient aggregation of mutual fund holdings. Review of Financial Studies, 2012, vol. 25, pp. 3490-3529.

For citation:

Sorokina M.M., Deduyshko E.I. The value of active management of mutual funds: foreign and Russian experience. CITISE, 2022, no. 2, pp.354-366. DOI: http://doi.org/10.15350/2409-7616.2022.2.31