Swedish fund managers appear to be ready for the challanges of the new defined contributions (DC) plans starting in 1999 from both a domestic and international perspective.
In a study we carried out of Swedish funds, we found that there is no significant difference in performance between the mutual funds managed from overseas or from Sweden, even for mutual funds that invests in overseas markets. The reason for the study is the increasing demand for qualitative information about funds due to the new DC schemes.
In this first such study, we summarise the results for three groups of mutual fund managers that are selling mutual funds (global, European or North American) in Sweden during a five-year period ending the September 30, 1998. The performance analyses have been studied in relative terms against their benchmarks. Our approach has been a combination of past performance and qualitative variables based on our in-house expertise of fund managers.
The fund management companies have been divided into three sub-groups: Swedish owned with management team in Sweden, Swedish owned with management overseas and overseas fund managers with management team overseas.
None of the fund manager groups outperformed the relevant index once costs were deducted. But 25% of the funds outperform the relevant index three out of five years. The study also shows a huge dispersion of performance within the groups. It is, however, possible in each market to find funds that consistently outperform. The qualitative variables such as organisation, investment philosophy and investment process are common for those funds which outperform consistently.
The most significant conclusion is the outstanding importance of allocation decision between markets. So the most important choice is that between markets: Should we invest in a global, European or a local fund?"
A simple example of one finding of the study shows that the mutual fund with the best performance outperforms the worst by more than15% per annum or over 100% during the five-year period, at no extra risk. This is in line with other analyses done by Mercer of other markets.
There are two important attributes of managers that outperform the market: a thorough investment process and strong team or personnel competence.
The study also indicates that Swedish fund management companies with management teams only in Sweden are more passive than overseas management teams or overseas managers.
Annelie Grundström is a consultant with Mercer in Stockholm"
No comments yet