A comparative real-case study: Equity mutual fund portfolio performance, benchmark portfolio performance and recommendation by financial institution

Abstract

This research contains a hundred real-case, actively managed portfolio returns managed portfolio returns that are compared to identical, fictional, ones containing the relative benchmarks that imitate the movements of the original allocation. The purpose is to end up with an overall conclusion about relevant performance. The efficient market hypothesis is tested by the comparison of specific, actual portfolios’ structure that through a prescreening process may result in advanced fund selection. In this step-by-step procedure, the outcome produced stand opposite the aforementioned hypothesis that has affected, the academic and professional literature. Actual portfolios, do, achieve better returns on average, but require also some further analysis, concerning a couple of points raised after results have been illustrated. Aside of the analysis gets in deeper fields as a third party involvement takes place as being the distributor of funds, advisor and performance evaluator at the same time. The first point refers to the fact that supreme selection of funds along with frequent transactions to rebalance the equity funds, part of the portfolio, may cause diminished overall performance compared to alternative investment behavior. Secondly, further research should be performed concerning expenses that burden investment and are not incorporated in the returns retrieved.