Abstract
Research on mutual fund performance is widely documented in developed countries. This thesis evaluates the performance of Equity Unit Trusts in the emerging market of South Africa. Six sub-categories of Equity Unit Trusts were analysed (i.e. Equity General, Equity Large Cap, Equity Mid & Small Cap, Equity Resource, Equity Financial and Equity Industrial) over the period from July 2007 to June 2014, which captured different market conditions. To test whether portfolio managers have stock selection and market timing ability, the Treynor-Mazuy (1966) model and Henriksson-Merton (1981) model were employed for each unit trust over the entire sample period. Besides testing for managerial ability, the non-parametric contingency table was used to test whether the performance generated by unit trusts does persist over a two-period framework. Despite the attractiveness of unit trusts as a sophisticated method of saving, weak evidence of stock selection as well as market timing ability was found. Moreover, most of the unit trusts across the six sub-categories are reported to have insignificant coefficients. When testing for performance persistence using returns, the Sharpe ratio and the Sortino ratio as performance metrics, the overall results also revealed weak evidence of persistence that is equally spread across winning and losing funds.
M.Com. (Financial Economics)