Equity-Focused Funds

As interesting as the overall statistics reported are, it is still a picture with a lot of noise, since there is a large difference between what is expected for the equity-focused funds and for the money market-focused funds. To circumvent this, this chapter will take a look at the statistics for the main asset class analysed throughout this paper, equities. For bonds, mixed assets and money markets, the same statistics can be seen in appendix 1.

60

Table 5.2: Return statistics for equity-focused funds only per year.

The statistics for equity-focused funds generally show what should be expected. Compared to the overall statistics equity-funds have strictly higher mean, standard deviation, median and quartiles.

Since equity markets are generally riskier and hence have higher expected return than bond and money markets, this is in line with expectations. Furthermore, equity-focused funds have a higher negative skewness in the distribution than the overall distribution.

These statistics are based on all equity-focused funds, i.e. does not look into whether there are differences across geographical focus areas. The two main geographical focus areas analysed

throughout this paper is emerging markets and the Nordic markets. Therefore, it makes sense to dig a bit deeper into these markets for equity-focused funds.

5.1.1.1 Emerging Markets

For the equity-focused funds focusing on there are 364 funds from the beginning of the period. This decline throughout the years as explained earlier, and there are "only" 309 funds left in 2017, meaning above 15% of the funds are discontinued in that period. Besides that, table 5.3 below shows the same statistics as reported earlier.

Table 5.3: Return statistics for emerging markets-focused equity funds only per year.

61 Noteworthy from these statistics are the very varying mean returns. This is maybe not very

surprising, as emerging markets are generally expected to be more volatile. The negative mean return in 2013 are also in line with the return of the MSCI emerging markets index, which reported a negative return of 2.60% in 2013 (MSCI, 2018). As emerging markets in general performed relatively bad in 2013, it is of course also expected that funds focusing on emerging markets are performing badly. Other than this fact, the statistic which is the most interesting is the standard deviation which is surprisingly not far from the standard deviation of the overall equity-focused funds, with 2014 as a clear exception to that.

The standard deviation of fund returns might be somewhat harder to interpret than standard deviation of stock returns, as this is based on funds which are already supposedly diversified. One interpretation of the fact that emerging markets-focused equity funds don't have that much higher standard deviation than the overall market is, that these funds may focus more on "just" realizing the market return of emerging markets, since this is harder to obtain. This means they own many of the same stocks and hence have a high correlation, lowering the standard deviation of their returns.

5.1.1.2 Nordic Markets

For the Nordic markets-focused equity funds there are 479 funds in 2013, which is only ~33% more than funds focusing on emerging markets. This is maybe a bit surprising but can be due to the somewhat broad definition of emerging markets applied by this paper. There is ~18% of these funds which are discontinued in the period, which is on line with the tendency seen in the emerging markets-focused equity funds. Besides that, table 5.4 below shows the same statistics as reported earlier.

Table 5.4: Return statistics for Nordic markets-focused equity funds only per year.

62 The first thing to note about the statistics are the very high mean and generally very low standard deviation. This is a good combination as it means that investors have a good chance of owning a fund which generates a high return. As explained earlier, a high standard deviation could mean a high correlation between funds, which may be due to (i) the funds owning many of the same stocks, or (ii) the stocks generally being highly correlated with the market, i.e. they have a high beta. The fact that the funds focused on Nordic markets have a lower standard deviation hence indicates that the factors mentioned are less present in these funds, compared to the ones focused on the emerging markets as shown above. Generally, the statistics shows that funds focused on the Nordic markets have performed well.

5.1.1.4 Global Markets

The last geographical focus area is the global markets, where there are 527 equity-focused funds in the beginning of the period of analysis. Around ~22% of these are discontinued during the period, which a little higher but still somewhat on line with what was found for emerging markets and Nordic markets above. Besides these numbers, the other statistics are reported below in table 5.5 showing the statistics in the same format as above.

Table 5.5: Return statistics for global markets-focused equity funds only per year.

These statistics are very much on line with the ones for the Nordic markets, although the mean and median are a little lower, except for 2014. Furthermore, the skewness in 2015 is highly negative, indicating a non-symmetric distribution where the median is higher than the mean, which is exactly what is observed here. Other than that, the statistics are very much on line with what was found for the Nordic focused equity-focused funds.

63