The Performance of Mutual Funds in Slovakia

Abstract

When deciding on tactical asset allocation, investors often support their decision-making using a scoring system that ranks the asset classes according to various criteria. Based on weekly fund flows since 2001, this article reveals that fund flow data can add significant value to such a scoring system. It shows that fund flow data allows one to achieve excess returns versus equally-weighted benchmarks in tactical regional equity allocation, tactical fixed income sector allocation, and tactical equity versus bond allocation. Investors can find the relevant fund flow information necessary to implement the backtested strategies in our weekly Cross Asset Monitor. When deciding on tactical asset allocation, investors often support their decision-making using a scoring system that ranks the asset classes according to various criteria. In this article, we analyse whether fund flows add value to such a scoring system. Money flows are the ultimate drivers of asset prices. But it is not just that money flows drive performance-good asset performance also tends to attract money flows. This interplay means fund flows tend to show some inertia, and as such should contain some momentum information.