An assessment of performance of active mutual fund management and passive fund management

Abstract

This study set out to assess the performance of Kenyan actively managed equity mutu funds with the stock market as a whole using the NSE 20 share index as the benchmark. Tl research study was done over the period 1.7.2003 to 30.6.2007. In order to achieve this objective, secondary data was used to generate each mutual fund return. Monthly holding period analysis was used to determine the performance of bot equity funds and the NSE 20 index. Since not all funds were in operation for the entire period between July 2003 and June 200' the study period was adjusted to a 2 year for the period between July 2005 and June 2007 t enable comparison of returns for all the funds. However, in the case of Old Mutual fun which had been in operation for the entire period, comparison with the market was als done for the period July 2003 and June 2007. The results of the study indicated that equity mutual funds outperformed the market for th period between July 2005 and June 2007. However, for the period between July 2003 ani June 2007, the equity fund of Old Mutual was outperformed by the market. The results also showed that Old Mutual equity fund performed better than Britisl American equity fund for the period between July 2005 and June 2007. The findings indicate that the investment managers of the equity funds in an effort to select undervalued securities can beat the market in the short run while in the long run it might not be possible