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Chasing returns: Are Swedish funds outperforming their benchmarks?

Jaarnek, Felicity LU (2024) NEKH01 20241
Department of Economics
Abstract
This study investigates the performance dynamics of Swedish mutual funds, with a particular focus on the impact of active management, as measured by tracking error, on risk-adjusted returns (Sharpe ratio). The findings reveal a consistent negative correlation between tracking error and Sharpe ratio, indicating that higher levels of active management are associated with poorer performance relative to benchmarks among Swedish mutual funds. This challenges the traditional notion that active management can deliver superior returns. For investors, the findings underscore the need to reconsider the value proposition of actively managed funds in favor of passive strategies with lower fees. For fund managers, the results suggest prioritizing risk... (More)
This study investigates the performance dynamics of Swedish mutual funds, with a particular focus on the impact of active management, as measured by tracking error, on risk-adjusted returns (Sharpe ratio). The findings reveal a consistent negative correlation between tracking error and Sharpe ratio, indicating that higher levels of active management are associated with poorer performance relative to benchmarks among Swedish mutual funds. This challenges the traditional notion that active management can deliver superior returns. For investors, the findings underscore the need to reconsider the value proposition of actively managed funds in favor of passive strategies with lower fees. For fund managers, the results suggest prioritizing risk management strategies that minimize deviations from benchmarks. Future research should continue to explore these dynamics in a Swedish context to provide a more comprehensive view of mutual fund performance. (Less)
Please use this url to cite or link to this publication:
author
Jaarnek, Felicity LU
supervisor
organization
course
NEKH01 20241
year
type
M2 - Bachelor Degree
subject
keywords
Mutual funds, active management, tracking error, passive investment, sharpe ratio
language
English
id
9170339
date added to LUP
2024-09-24 08:41:06
date last changed
2024-09-24 08:41:06
@misc{9170339,
  abstract     = {{This study investigates the performance dynamics of Swedish mutual funds, with a particular focus on the impact of active management, as measured by tracking error, on risk-adjusted returns (Sharpe ratio). The findings reveal a consistent negative correlation between tracking error and Sharpe ratio, indicating that higher levels of active management are associated with poorer performance relative to benchmarks among Swedish mutual funds. This challenges the traditional notion that active management can deliver superior returns. For investors, the findings underscore the need to reconsider the value proposition of actively managed funds in favor of passive strategies with lower fees. For fund managers, the results suggest prioritizing risk management strategies that minimize deviations from benchmarks. Future research should continue to explore these dynamics in a Swedish context to provide a more comprehensive view of mutual fund performance.}},
  author       = {{Jaarnek, Felicity}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Chasing returns: Are Swedish funds outperforming their benchmarks?}},
  year         = {{2024}},
}