Aktiv förvaltning av fonder på Emerging Markets
The main purpose of this Master Thesis has been to evaluate whether active fund management is profitable on Emerging Markets. The material used to examine this consists of 106 actively managed funds, with varying length during the period 1988-2006 and who uses MSCI Emerging Markets (MSCI EM) as benchmark index. The thesis has been written under the supervision of the Asset Management Department of Länsförsäkringar AB (LFAB) and the Department of Production Economics, Linköping Institute of Technology. Apart from the main purpose, the methodology used is also meant to form a template for in-depth or similar studies, preferably by the assigner of this survey, LFAB.The results shows that the median manager underperforms the MSCI EM throughout the whole period, which leads to the conclusion is that active management on Emerging Markets is not profitable. A grouping of the funds based on tracking error still shows that a majority of the managers in all of the groups underperforms against the benchmark. All in all, the relationship between tracking error and the profit of the fund is not significant and managers in groups with higher level of tracking error, most likely, does not outperform the rest of the managers. The material has also been divided into subperiods to assess overall market conditions influence on manager?s performance. The results are principally equivalent with the ones obtained for the period as a whole; however, a slight tendency of better performance in times of stationary rates compared to rising ones is observed. All results are based on NAV-rates of the fund and by the implicit assumption that passive management is free of charge. Naturally the results for the fund managers are improved if a cost of buying the index is considered. However, the median manager is still most likely to be underperforming against the MSCI EM, even when such a cost is taken into account.In every grouping of mangers there are, despite the negative performance of the median manager, still a number (15 - 25 %, depending on the level of tracking error and time period) that outperforms MSCI EM. The mangers performance is therefore studied under the hypothesis that it is the same mangers every year that beats the index. The results indicate persistence on a general level, that it mainly originates from the top rank of mangers and also that this persistence has strengthened during the last few years. This is an interesting result, especially from an investor?s point of view, and also the most remarkable positive result of this thesis. Further studies should therefore be carried out, primarily to examine the practical usefulness of this result.