Abstract
M.Com. (Financial Management)
In this study, the extent to which performance persistence exists within the scope of South African collective investment schemes was analysed. In addition, the current practices of financial planners were investigated to establish whether or not financial planners use past performance as a criterion for recommending specific investment funds to investors. In other words, the extent to which financial planners are justified in using past performance as a criterion for fund selection was investigated.
The study is exploratory in nature and is comprised of two phases, both of a quantitative nature. During Phase A, secondary data relating to the historical returns of South African collective investment schemes was collected to determine the extent of performance persistence over a one- and three-year period respectively. During Phase B, a cross-sectional survey was conducted to determine the practices of financial planners when advising investors on fund selection decisions.
The findings revealed that performance persistence does not exist to the extent that past performance is an indicator of future performance. Financial planners, however, tend to utilise past performance as the main criterion for recommending specific collective investment schemes to investors.