Global Equity Fund Performance Evaluation with Equity and Currency Style Factors

55 Pages Posted: 18 Oct 2016 Last revised: 19 Oct 2018

See all articles by David R. Gallagher

David R. Gallagher

Rozetta Institute

Graham Harman

Russell Investments

Camille Schmidt

SuperRatings

Geoff Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics

Date Written: October 17, 2018

Abstract

We propose a portfolio holdings-based method for evaluating global equity funds that decomposes excess returns versus benchmark indices into contributions from six equity and three currency ‘style factors’, and alpha. The method is used to characterize sources of performance for institutional global equity funds from 2002 to 2012. The average fund generates insignificant excess returns of 0.19% per quarter, reflecting contributions from style factor exposures of -0.13% and alpha of 0.32%. We also show that performance varies with fund style. Our analysis demonstrates how portfolio holdings-based analysis may be applied in global markets, while highlighting the importance of currency exposures.

Keywords: Global Equities, Performance Evaluation, Active Management, Currency

JEL Classification: G23

Suggested Citation

Gallagher, David R. and Harman, Graham and Schmidt, Camille and Warren, Geoffrey J., Global Equity Fund Performance Evaluation with Equity and Currency Style Factors (October 17, 2018). CIFR Paper No. 123/2016. Available at SSRN: https://ssrn.com/abstract=2854415 or http://dx.doi.org/10.2139/ssrn.2854415

David R. Gallagher (Contact Author)

Rozetta Institute ( email )

Sydney

Graham Harman

Russell Investments ( email )

909 A Street
Tacoma, WA 98402
United States

Camille Schmidt

SuperRatings

Australia

Geoffrey J. Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics ( email )

CBE Building 26C
Kingsley Sreet, Acton
Canberra, ACT 0200
Australia

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