The Performance of Actively and Passively Managed Swiss Equity Funds

37 Pages Posted: 9 Jan 2009

See all articles by Manuel Ammann

Manuel Ammann

University of St. Gallen - School of Finance

Michael Steiner

Wegelin & Co., Private Bankers

Date Written: December 1, 2008

Abstract

Using a Switzerland-specific Carhart model, we study the risk-adjusted performance of actively and passively managed mutual funds investing in Swiss stocks from 1989 to 2007. We also compare the performance of actively managed funds to passively managed funds instead of comparing them to a theoretical index. For a sample of 160 funds with 13,672 monthly observations we find that active as well as passive funds significantly underperform indices on an aggregated basis. However, active large-cap funds significantly underperform and active Small-&Mid-Cap-funds significantly outperform the index. Further, we find that the average manager of an active Swiss equity fund systematically overweights small-cap, value, and low-momentum stocks. When directly comparing active to passive funds, active funds significantly underperform by -1.1% p.a. on average. While active institutional funds can almost keep up with the performance of passive funds, active retail funds cannot and drive the substantial underperformance observed for active funds. Finally, active funds perform better before the millennium than thereafter. This robust result supports the hypothesis of ongoing efficiency increases in the Swiss stock market.

Keywords: Mutual Funds, Index Funds, Performance, Switzerland

JEL Classification: G11, G12, G14

Suggested Citation

Ammann, Manuel and Steiner, Michael, The Performance of Actively and Passively Managed Swiss Equity Funds (December 1, 2008). Available at SSRN: https://ssrn.com/abstract=1324728 or http://dx.doi.org/10.2139/ssrn.1324728

Manuel Ammann (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Michael Steiner

Wegelin & Co., Private Bankers ( email )

Bohl 17
CH-9000 St. Gallen
Switzerland

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