Moore shares mutal funds findings

Mutual fund managers in Barbados do very well at timing very large swings in the market, but not so for small upticks.This was revealed last Wednesday by economist Dr Winston Moore as he reported the results of his study on Management Practices and the Performance of Mutual Funds in the Caribbean.Speaking at The Mount Restaurant, University of the West Indies (UWI) Cave Hill campus, during a breakfast presentation hosted by UWI and FirstCaribbean International Bank, Moore said mutual funds in Barbados tended to generate above-average returns.“It should be almost impossible for a mutual fund manager to beat the market because if you think about it, a stock price reflects the views, the experiences of all the portfolio managers within a particular jurisdiction as well as abroad,” he said.The economics lecturer said if mutual funds generated returns over and above those of the market, it could indicate that managers at those funds had knowledge that the rest of the market did not possess.However, his study, which employed monthly observations over the period January 2003 to April 2009, found that mutual fund managers do not seem to have any superior informational advantage that would allow them to select better performing shares.Instead, he said, most of the variation could be explained by investments in hot stocks, large cap shares and firms with relatively high book-to-market equity valuations.The former Central Bank of Barbados economist noted that such research was necessary, given the large amount of money invested in mutual funds on an annual basis.“It could have a significant impact on investor returns as well as systemic risks in the Caribbean,” he said.He said data from 2006 showed that in Barbados the industry contributed about five per cent of gross domestic product. Moore also said there was high correlation between mutual fund returns and stock market returns, and a fund reporting a 12.1 per cent return last year was likely to report a positive return this year. (NB)