Evaluation of Performance of Investment Funds Based on Decision Models (DEA)

Alireza Samet, Mohammadreza Shahriari, Hossein Mombeini, Niloofar Sabet joo
2016 Data Envelopment Analysis and Decision Science  
Selection of a suitable investment funds is very important from investors' point of view and may have a significant impact on the profit or loss of the funds. Therefore, evaluation of performance of investment funds to choose the most suitable fund will be given special emphasis. One of the new techniques for evaluating the performance of the Funds based on efficiency is the Data Envelopment Analysis technique. Accordingly, the present study is aimed to analyze and evaluate the performance of
more » ... he performance of investment Funds in capital market of Iran, using the technique of efficiency evaluation through data envelopment analysis technique (DEA). This research is a descriptive -applicable study and to analyze the efficiency and effectiveness, 53 investment funds in the capital market of Iran in 2013 were considered as the sample. To analyze the efficiency of these funds, data envelopment analysis (DEA) is used. Research findings showed that in 2013, of a total of 53 examined funds, 11 funds were in the efficiency situation and the other 42 funds were in a state of inefficiency. Also the reference funds and virtual composited funds of all inefficient funds were evaluated. Hence, from fundamental point of view, there is no difference between a certain investor and a mutual fund. However, from creational viewpoint, investment funds by integrating capitals result in making a competetive environment for companies in order to attract the resources and forming a portfolio to mitigate the risks involved in investments as well (Erfanian and Shirzadi, 1389 [2]). Accordingly, from investors' viewpoint, the choice of an approperiate fund is a key decision making and can has a significant impact on theirs profit or loss. Most investors for investment fund selection utilize the historical data and/or personal knowledge and/or statistical information. However, if an investment fund acts as a decision maker unit, it is clear that an accurate estimation of the future performance of an investment fund can significantly increase the value of assets (Valery, 2009) [14]. On the other hand, the intensive fluctuations in returns, arised from ignoring a portfplio of shares, leads to the active investors abandon the capital market and the potential investors cannot be attracted by the market. Therefore, it is essential to make an attempt in order to formulate Iran capital market and implement a new approach for evaluating the performance to facilitate the entry of new investors and eliminate the difficulty of the existing investors. Form the micro point of view, it can be stated that a transparent and comparable criterion in evaluating the performance of investment funds in addition to the accurate control of the assets in the capital markets, can determine an efficient methodology to form a portfolio for investment fund managers, and make a comparison between the investment funds in order to select the best one (Jawe and Wang, 2007) [15]. In order to attract investors, capital markets need to set up the investment funds, which not only balance the market; but also lead to a rational investment. However, in recent years, the selection of investment funds is an important problem. Therefore, there is a necessary need to measure the overall performance of the fund more accurately. The main issue in this study is the lack of a comprehensive criterion for ranking the investment funds in Iran. The traditional methods of the fund ranking in Iran usally apply return and risk criteria to evaluate the performance of the investment funds. However, the multi-criteria decision-making methods utilize a set of tangible and intangible criteria for estimating the future returns and current performance. These techniques eliminate the drawbacks of the conventional methods. According to the principal concepts of the data envelopment analysis (DEA) technique, used in this study, investment funds are compared based on their efficiency. This criterion is adopted by Morningstar Institute as a tool for classification of small scale investment funds and is taken into account a link between theory and practice. Accordingly, this study intends to rank the investment funds on the basis of a reasonable and logical approach in order to accurately calculate the efficiency of the funds (Gholami, 1390) [4] .
doi:10.5899/2016/dea-00129 fatcat:b7ziqljpr5atfamftkcbh7od6e