Norwegian Global Mutual Funds : An Empirical Study of Active Management and Fund Performance

Abstract

The following paper uses a dataset free of survivorship bias in the period of 2009 - 2017. The purpose of this research is to investigate the performance of open end Norwegian global mutual funds. We start by first applying tracking error and R2 to measure the activeness, and the results indicate that 22.73 % of the funds are closet indexers. Secondly, we evaluate their performance in subject to their benchmark by looking at the alpha generated from various factor models. We find that some managers are able to beat their benchmark gross of fees, but we find no significant evidence of outperformance net of fees. To be able to distinguish skill from luck we utilize a bootstrap procedure where we evaluate the distribution of the cross section of alpha if every fund had zero true alpha by construction. We find that on average fund managers are not able to deliver alpha, but that there exists some evidence of a nonzero true alpha in the extreme left and right tails when using gross returns.