Performance persistence in UK equity funds - a literature review

Document description

The Association of Unit Trust and Investment Funds (AUTIF) commissioned Charles River Associates Limited (CRA) to undertake an independent investigation of whether information on the past performance of UK unit trusts is useful for retail consumers (or their advisers) in making investment decisions.
This commission was undertaken in order to submit a robust response to a number of publications prepared either for, or on behalf of the FSA, which discuss the use of past performance and its use in the Comparative Tables. The findings of Bacon and Woodrow, the FSA’s Occasional Paper 9 and the FSA Task Force on Past Performance have concluded that the past performance of equity fund information is not relevant to consumers in the selection of funds.
The first part of the commission has been to survey the academic and professional literature written on the subject of performance persistence in unit trusts (known as mutual funds in the US). The objective of this report is to provide the most comprehensive review of the literature to date. It reviews the literature cited in other studies and draws on evidence previously overlooked. Based on this thorough appraisal, it re-examines these conclusions.