A Study on Factors Influencing Mutual Fund Portfolio Performance

Abstract

Mutual fund portfolio managers do not always meet performance expectations, resulting in loss of capital reserves. Out of 3,612 U.S. based open-ended mutual funds, the risk-adjusted performance of 2,890 (80%) failed to meet the S&P 500 performance between the year 2006 to 2016. Grounded in Markowitz's modern portfolio theory, this correlational study examined the relationship between mutual fund class type, portfolio turnover, fund longevity, management turnover, and annual fund risk-adjusted performance. Archival data were collected from 88 U.S. based equity mutual funds companies. The results of the multiple regression analysis indicated the model as a whole was able to significantly predict annual fund risk-adjusted performance for the 5-year period ending 2016, F (4, 83) = 3.581, p = .010, R2 = .147. In the final model, mutual fund class type and portfolio turnover were statistically significant with mutual fund class type (ß= .249, t = 2.302, p = .024) accounting for a higher contribution to the model than portfolio turnover (ß = .238, t = 2.312, p = .023).