Indexes versus Active Funds: A Performance Evaluation of Swedish Registred Mutual Funds

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Mutual funds are today one of the most popular forms of saving or investment. The increased interest in mutual funds calls for an increased focus on evaluations of their performance. From an investors point of view it is important to know whether actively managed funds, not only add value but, add enough value to offset the costs associated with active management. In order to answer this question the well known performance measure Jensen’s alpha is estimated using the traditional CAPM approach. In addition, an alternative approach to estimate performance by incorporating the funds’ communicated benchmarks is introduced. Moreover, a database free from survivalship bias, encompassing the Swedish registred mutual fund space, is employed. Our method and database enables us to also investigate different types of funds besides the equity funds that most articles and papers focus on. The results do not support the confidence in active management evidenced by the lionshare of fund wealth being allocat...