The popularity of funds that replicate a market performance continue to surge and several literatures have documented the superiority of index funds outperforming their active fund management counterparts. Most of these studies have been based on data from developed, emerging and frontier economies including the USA, Britain, France, Japan, India and many other countries. This study joins the debate by analysing Ghana specific data to measure the performance of Ghanaian fund managers from 2006 to 2013.
This is the first of such analysis in the Ghanaian context. Using aggregate average returns, Sharpe ratio and Jensen’s Alpha based on the Capital Asset Pricing Module (CAPM) as the key performance indices, the study finds that fund managers in Ghana by aggregation do not provide superior returns using the GSE composite index as the market return benchmark and that fund managers on average have underperformed the market during the period of study. The aggregate of their performance further worsen on a risk adjusted returns after factoring in fund managers cost.
This notwithstanding, some fund managers on a risk adjusted average return basis outperformed the market return albeit funds with an asset allocation portfolio of not less than 60% equity. Although the Ghanaian economy exhibit signs of a frontier market, the research observed fund managers in Ghana do not exhibit market timing skills and stock selection abilities that would have made them outperform the market. Evidence of superior performance persistence is also not noticeable but consistency in underperformance is observed.
The outcome of this work indicate superior outperformance by replicating the GSE composite index as compared to active fund management and adds to the existing works that suggest the failure of active fund management to outperform their benchmark over a continuous period.
Inhaltsverzeichnis (Table of Contents)
- CHAPTER ONE
- 1.1 Introduction to the Ghanaian Economy, Fund Management, and Stock Exchange
- 1.1.1 The Concept of “Zero Sum Game” and Mutual Funds
- 1.2 Research Aim
- 1.3 Research Questions and Key Hypothesis
- 1.4 Dissertation Outline
- CHAPTER TWO
- 2.1 Literature Review
- 2.1.1 Background to Index Funds
- 2.1.2 The Active/Passive Debate
- 2.1.3 Picking Fund Manager with Persistent Performance and the Predictability of Index Funds
- 2.1.4 Fund Managers Performance: Market Timing Skills or Luck?
- 2.1.5 The Continuous Popularity of Active Fund Management
- 2.1.6 Impact of Leadership, Market Segment and Market Cyclicality on Performance
- 2.1.7 Diversification and Index Funds
- 2.1.8 Active Share and Closet Index
- 2.1.9 The Ghana Stock Exchange
- 2.2 Summary of Literature Review
- 2.1 Literature Review
- CHAPTER THREE
- 3.1 Research Methodology
- 3.2 Mutual Funds and Unit Trusts Industry in Ghana and Research Sample Size
- 3.2.1 Summary of Collective Investment Schemes Year on Year from 2006
- 3.3 Specific Data Used and Their Sources
- 3.4 Conduct of Analysis
- CHAPTER FOUR
- 4.1 Data Analysis, Findings and Discussion of Findings
- 4.1.1 Performance of Funds with Data from 2006
- 4.1.2 Performance of funds with continuous 2 year data within 2006 and 2013
- 4.1.3 Fund Manager Efficiency
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study aims to analyze the performance of Ghanaian fund managers from 2006 to 2013, comparing their returns to the Ghana Stock Exchange (GSE) composite index. It seeks to determine whether active fund management in Ghana outperforms passive index fund replication. This is the first such analysis in the Ghanaian context.
- Performance comparison of active vs. passive fund management in Ghana.
- Assessment of Ghanaian fund managers' market timing and stock selection skills.
- Analysis of the impact of fund manager costs on risk-adjusted returns.
- Examination of the persistence of superior or inferior fund manager performance.
- Contribution to the ongoing debate on the superiority of index funds over actively managed funds.
Zusammenfassung der Kapitel (Chapter Summaries)
CHAPTER ONE: Introduction to the Ghanaian Economy, Fund Management, and Stock Exchange. This chapter sets the stage for the research by introducing the Ghanaian economy, the fund management industry within that context, and the role of the Ghana Stock Exchange (GSE). It establishes the research aim, specific questions to be addressed, and outlines the structure of the dissertation. The concept of a "zero-sum game" in relation to mutual funds is also introduced, framing the fundamental question of whether active fund management offers superior returns compared to simply replicating market indices.
CHAPTER TWO: Literature Review. This chapter provides a comprehensive overview of existing literature related to index funds, active versus passive fund management, and the performance of fund managers. It explores the debate surrounding the ability of active managers to consistently outperform market benchmarks. Key topics discussed include the persistence of fund manager performance, the role of market timing and stock selection skills, the enduring popularity of active management despite evidence suggesting its limitations, the influences of leadership, market segmentation and cyclicality, the importance of diversification and its link to index funds, and the concepts of active share and closet indexing. The chapter concludes with a summary that lays the groundwork for the research methodology in the subsequent chapter.
CHAPTER THREE: Research Methodology. This chapter details the research methods employed in the study. It describes the methodology used to analyze the performance of Ghanaian mutual funds and unit trusts. It outlines the selection of the research sample, specifying the data sources, and explains the analytical techniques applied, including the key performance indicators used. The chapter clarifies how the data were collected and processed, laying the foundation for the analysis of results presented in the following chapter.
Schlüsselwörter (Keywords)
Mutual funds, active management, index funds, Ghana, performance measurement, GSE composite index, Sharpe ratio, Jensen's Alpha, Capital Asset Pricing Model (CAPM), risk-adjusted returns, market timing, stock selection.
Frequently Asked Questions: Analysis of Ghanaian Fund Manager Performance (2006-2013)
What is the main focus of this research?
This research analyzes the performance of Ghanaian fund managers from 2006 to 2013, comparing their returns to the Ghana Stock Exchange (GSE) composite index. It aims to determine whether active fund management in Ghana outperforms passive index fund replication.
What are the key themes explored in this study?
Key themes include a performance comparison of active versus passive fund management in Ghana; assessment of Ghanaian fund managers' market timing and stock selection skills; analysis of the impact of fund manager costs on risk-adjusted returns; examination of the persistence of superior or inferior fund manager performance; and contribution to the ongoing debate on the superiority of index funds over actively managed funds.
What is the scope of the study's data?
The study utilizes data from 2006 to 2013, analyzing the performance of Ghanaian mutual funds and unit trusts. It specifically compares the performance of funds with data from 2006, as well as those with continuous 2-year data within that period.
What methodology is employed in this research?
The research methodology involves analyzing the performance of Ghanaian mutual funds and unit trusts. It includes selecting a research sample, specifying data sources (details provided within the study), and applying analytical techniques to assess key performance indicators. The chapter on methodology clarifies data collection and processing methods.
What key performance indicators (KPIs) are likely used?
While not explicitly listed in this preview, the keywords suggest the use of metrics such as the Sharpe ratio, Jensen's Alpha, and the Capital Asset Pricing Model (CAPM) to evaluate risk-adjusted returns.
What is the structure of the dissertation?
The dissertation is structured into four chapters. Chapter One introduces the Ghanaian economy, fund management, and the GSE, establishing the research aim and questions. Chapter Two provides a comprehensive literature review. Chapter Three details the research methodology. Chapter Four presents data analysis, findings, and a discussion of the findings, including an analysis of fund manager efficiency.
What is the significance of this research?
This is the first analysis of its kind in the Ghanaian context, providing valuable insights into the performance of active versus passive fund management within the Ghanaian market. It contributes to the broader academic debate on the effectiveness of active fund management.
What are the key concepts discussed in the literature review?
The literature review covers index funds, the active/passive debate, fund manager performance (market timing skills vs. luck), the popularity of active management, the impact of leadership and market factors on performance, diversification, active share, closet indexing, and the Ghana Stock Exchange.
What is the concept of a "zero-sum game" in this context?
The "zero-sum game" concept is introduced to frame the central research question: whether active fund management provides superior returns compared to simply replicating market indices. It implies that one party's gain is another's loss, potentially relevant in the context of active versus passive fund management.
- Quote paper
- Dickson Osei (Author), 2015, Active and passive fund management. A look at fund management performance against the Ghana stock exchange (GSE) composite index, Munich, GRIN Verlag, https://www.grin.com/document/354531
