INVESTING INTO THE ABYSS: THE CONTINUED MISCLASSIFICATION OF MULTI-SECTOR MANAGED FUNDS

J. Watson, N. Allen, K. Phoon, J. Wickramanayake
2010 Corporate Ownership and Control  
The objective of this paper is to assess whether Australian multi-sector managed funds are misclassified, and then, having found this to be the case, determine if this misclassification has any impact on fund performance. In this research we adopt a strong form of returns based style analysis to investigate a monthly sample of Australian multi-sector funds over the five-year sample period 2003:04-2008:03. The evidence provided demonstrates that insufficient attention has been paid as to whether
more » ... paid as to whether fund managers are able to keep within their tactical asset allocation ranges and presents that misclassification exist for Australian multi-sector managed funds but that the effect on fund performance is not significant. Additional areas of interest worthy of further attention but not investigated within this paper include extending the work to investigate additional fund types (including superannuation) to determine if the results hold once funds are overexposed to certain asset classes in bullish and bearish market conditions. We find the current system of classification of managed funds on the basis of their stated objectives has significant room for improvement. Our findings demonstrate a lack of association, and the implication to investors is that, misclassification may not be a significant reason for fund underperformance. The paper adds to the literature by demonstrating that no association exists between misclassification and fund performance.
doi:10.22495/cocv8i1c6p3 fatcat:ttg4j6vckbe6vf73f3yhztctgq