EVALUATION OF THE PERFORMANCE OF TURKISH EQUITY UMBRELLA FUNDS USING THE MORNINGSTAR RATING SYSTEM

Abstract

Purpose - Different types of funds exist depending on the assets the portfolio is composed of. The main types of funds include; bond umbrella funds, equity umbrella funds, precious metal umbrella fund, fund basket umbrella funds, money market umbrella funds, participation umbrella fund, balanced umbrella funds, free umbrella funds, guaranteed umbrella fund, umbrella fund for protection purposes.The subject of our study is equity umbrella funds. These kinds of funds receive at least 80% of the share of investment by domestic and/foreign issuers. Purpose of this study is evaluating the performance of 57 Turkish equity umbrella funds which operate continuously between January 2012-December 2016 by using Morningstar rating system.

Methodology - The Morningstar (star) rating system, which has proven to be an effective system for ranking mutual funds, has become the focus of both academic work and applications. This system, developed by Morningstar, ranks the performance results of mutual funds by assigning them 1 to 5 stars according to their adjusted risks.

Findings - The results of the study reveal a lack of effective management of the equity umbrella funds, and that they perform below Treasury bond yields. The mutual funds, consequently, showed overall negative Morningstar performance results. It was determined that while foreign equity weighted mutual funds are more successful, mutual funds that invest in equity in the index are not quite successful. Conclusion- The study used the Morningstar rating system to evaluate 57 equity umbrella funds operating in Turkey between the periods of January 2012 and December 2016. The results obtained in the study regarding performance rankings and performance are not meant as a prediction of the future performance of the concerned funds, they are only intended to assess the value of the equity umbrella funds at a specific period in the past using an internationally accepted rating system.  The data obtained indicated that the equity umbrella funds have an overall negative Morningstar performance.  

The equity umbrella funds are considered to be underperforming since they performed poorly compared to the Treasury bills used in the study. Under the assumption that past performance results will continue in the future, it is thought that the results are meaningful and should be followed. 

Keywords

• Equity umbrella funds,performance,morningstar rating,risk,fund management

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