AN EVALUATION OF TURKISH MUTUAL AND PENSION FUNDS’ PERFORMANCES

Year 2017, Volume: 3 Issue: 1, 131 - 142, 30.06.2017

Jale S. Oran Emin Avci , Mahmood Ashoor Omer Faruk Tan

https://doi.org/10.17261/Pressacademia.2017.399

Abstract

This study evaluates the performance of Turkish type-A
equity mutual funds and growth equity pension funds for the period between
01.01.2009 and 31.12.2015, using the Sharpe, Sortino, Treynor, Jensen, and
Information ratio models, followed by the TOPSIS (Technique for Order
Preference by Similarity to Ideal Solution) model, which combines the
previously mentioned evaluation techniques to reach to a comprehensive ranking
of the funds. In addition, the study tests the ability of fund managers to
outperform the market using Jensen’s alpha and Treynor-Mazuy models. In this
study, a total of 15 type-A mutual funds and 10 growth equity pension funds
have been evaluated and ranked. After using the Jensen’s alpha and
Treynor-Muzay models, the results, in general, indicate that the managers of
these funds do not possess the ability to outperform the market neither by
stock selection nor by market timing. For market timing, only one pension fund
has a statistically significant measure implying that its management possesses
the ability to time their investments according to their expectations of the
future movements of the market. On the other hand, only one mutual fund shows
to have outperformed the market by stock selectivity while statistically
significant at the 1% level. The study also ranked the mutual and pension funds
using the Sharpe, Sortino, Treynor, Information ratio and Jensen models,
followed by the TOPSIS model. On the average, pension funds seem to outperform
mutual funds when Treynor, Information, and Jensen models are considered.
While, when Sharpe and Sortino models are considered, mutual funds seem to
outperform pension funds. In addition, it seems that mutual funds outperform
pension funds when all measures are combined using the TOPSIS model. 

Keywords

TOPSIS method, mutual funds, pension funds, Jensen’s Alpha, market timing ability

References

• Acikgöz, E., Uyguntürk, H., & Korkmaz, T. (2015). Analysis of factors affecting growth of pension mutual funds in Turkey. International Journal of Economics and Financial Issues, vol. 5, no. 2, p. 427-433.
• Akpınar, O. (2014). Performance evaluation of pension funds and mutual funds in Turkey and the timing ability of fund managers. British Journal of Economics, Finance and Management Sciences, vol. 9, no. 1, p. 73-100.
• Alptekin, N. (2009). Performance evaluations of Turkish type-A mutual funds and pension stock funds by using TOPSIS method. International Journal of Economics and Finance, vol. 1, no. 2, p. 11-22.
• Bireysel Emeklilik Sistemi Verileri (2014). Retrieved on December 09, 2016 from http://www.egm.org.tr/
• Blake, C. R., E. J. Elton, and M. J. Gruber (1993). The performance of bond mutual funds. The Journal of Business, vol. 66, no. 3, p. 370–403.
• Capital Markets Board of Turkey. Monthly Statistical Bulletin. Retrieved on December 15, 2016 from http://www.spk.gov.tr/
• Detzler, M. L. (1999). The performance of global bond mutual funds. Journal of Banking & Finance, vol. 23, no. 8, p. 1195–1217.
• Elton E.J., Gruber M.J., Das S. and Hlavka M. (1993). Efficiency with costly information: A reinterpretation of evidence from manager portfolios. Review of Financial Studies, vol. 6, p. 1-23.
• Fama E.F. and French K.R. (2010). Luck versus skill in the cross-section of mutual fund returns. Journal of Finance, vol. 65, p. 1915-1947.
• Gökçen, U., & Yalçın, A. (2014). The case against active pension funds: Evidence from the Turkish private pension system. Retrieved on December 08, 2015 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2372059
• Gürsoy, T. C., and Y. Erzurumlu (2001). Evaluation of portfolio performance of Turkish investment funds. Doğuş Üniversitesi Dergisi, vol. 4, no. 8, p. 43–58.
• Henriksson, R. D., and R. C. Merton (1981). On market timing and investment performance. II. Statistical Procedures for Evaluating Forecasting Skills. The Journal of Business, vol. 54, no. 4, p. 513–33.
• Individual Pension System Progress Report. Retrieved from http://www.egm.org.tr/bes2014gr/bes2014gr_en.pdf
• Hui. C.C., Jiuan, L. J., Horng, L. J., & Chen, C. M. (2010). Domestic open-end equity mutual fund performance evaluation using extended TOPSIS method with different distance approaches. Expert Systems with Applications, vol. 37, no. 6, p. 4642–4649.
• Hwang, C. L. and Yoon, K. S. (1981). Multiple Attribute Decision Making: Methods and Applications. Springer-Verlag, New York.
• Jensen, M.C. (1968). The performance of mutual funds in the period 1945-1964. The Journal of Finance, vol. 23, no. 2, p. 389-416.
• Jiuan, L. J., Chen, C.M., & Hui, C. C. (2007). A comparison of usual indices and extended TOPSIS methods in mutual funds’ performance evaluation. Journal of Statistics and Management, vol. 10, no. 6, p. 869-883.
• Kurtaran, A., Karakaya, A., & Dağlı, H. (2013). Improvement of private pension system in Turkey and measurement of its with DEA. International Journal of Economics and Finance, vol. 5, no. 11, p. 163-173.
• Malkiel G. (1995). Returns from Investing in Mutual Funds: 1971 to 1991. Journal of Finance, vol. 50, p. 549-572.
• McDonald, J. G. (1973). French mutual fund performance: Evaluation of internationally diversified portfolios. Journal of Finance, vol. 28, no. 5, p. 1161–80.
• OECD Pension Funds in Figures. (2015). Retrieved on December 12, 2016 from http://www.oecd.org/finance/Pension-funds-pre-data2015.pdf
• Sharpe, W. (1966). Mutual fund performance. The Journal of Business, vol. 39, no. 1, p. 119-138.
• Treynor, J. L. (1965). How to rate management of investment funds. Harvard Business Review, vol. 43, no. 1, p. 63-75.
• Treynor, J. L., & Mazuy, K.K. (1966). Can mutual funds outguess the market? Harvard Business Review, vol. 44, p. 131-136.
• Türegün, N., & Kaya, C. T. (2014). Performance evaluation of Turkish pension mutual funds. International Journal of Economics, Finance and Management, vol. 3, no. 1, p. 22-27.