The Performance of Separate Accounts and Collective Investment Trusts
38 Pages Posted: 21 Jun 2012
Date Written: June 21, 2012
Despite the size and importance of separately managed accounts and collective investment trusts, their characteristics and performance have not been previously studied in the financial economics literature. In this paper, we show that, using the Fama-French-Carhart 4-factor model, on average separate account performance is similar to that of index funds and superior to that of actively managed mutual funds. Management supplies a benchmark for each of those accounts. When the management-selected benchmark rather than the single index that best fits the return pattern of the account or the Fama-French-Carhart 4-factor model is used to measure performance, performance is significantly overstated. We also examine and find a set of variables that explains (at a statistically significant level) both the cross section of alphas and the cross section of cash flows. In addition to the set of variables that have been used to explain those phenomena in mutual funds, a set of organizational variables such as partnership form or corporate form are found to have a statistically significant impact on alphas and cash flows.
Keywords: performance, separate accounts, collective investment trusts, portfolios
JEL Classification: G11, G23
Suggested Citation: Suggested Citation