Active Management - How Actively Managed Are Swedish Funds?

Abstract: Purpose: This thesis concentrates on Swedish equity funds investing in Sweden. The objective is to determine to what extent actively managed funds really are active and if there is any relationship between excess return and active management. Data and Methodology: The data used in this thesis consists of 37 mutual funds and one index and stretches from 2001-2012. The fund data is collected from the Swedish Financial Supervisor Authority, Bloomberg and the Benchmark index holdings is collected from SIX-Telekurs. The level of active management is determined by using Tracking Error and Active Share. Tracking error calculates how much the funds returns deviate from the benchmark index and Active Share measures how much fund holdings differ from the benchmark index holdings. Multiple regressions and descriptive analysis is used to achieve the results. Results: Overall, Swedish mutual equity funds are proved to be quite passive in comparison to previous studies of the American market. On average, 65% of the funds assets in Sweden are invested accordingly to the benchmark index. Tracking Error is proved statistically significant as an explanatory variable for excess return. No statistical proof can be found for Active Share in that sense. However, the descriptive analysis suggests that a higher Active Share corresponds to a higher excess return. Overall Swedish funds underperform by 1,98 % compared to the benchmark index over the investigated sample period.