The Performance of Separate Accounts and Collective Investment Trusts

38 Pages Posted: 21 Jun 2012

See all articles by Edwin J. Elton

Edwin J. Elton

New York University (NYU) - Department of Finance

Martin J. Gruber

New York University (NYU) - Department of Finance

Christopher R. Blake

Fordham University - Gabelli School of Business

Date Written: June 21, 2012

Abstract

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

Elton, Edwin J. and Gruber, Martin J. and Blake, Christopher R., The Performance of Separate Accounts and Collective Investment Trusts (June 21, 2012). Fordham University Schools of Business Research Paper No. 2089044. Available at SSRN: https://ssrn.com/abstract=2089044 or http://dx.doi.org/10.2139/ssrn.2089044

Edwin J. Elton

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)

Martin J. Gruber (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)

Christopher R. Blake

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Lowenstein Building
New York, NY 10023
United States
212-636-6750 (Phone)

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