Fixed-income funds versus equity funds performance : the perceived superiority based on selected Maltese funds data

Abstract

During the last 10 years we have witnessed a remarkable development in the fund industry in Malta with an ever increasing number of funds being licensed by Malta Financial Services Authority (MFSA). The objective of this thesis is to analyse the fund industry in Malta and evaluate funds' performance by comparing two classes of funds, fixed-income and equity. We analyse the performance of a sample from the population of a locally based funds. As to ensure that the comparison is valid and robust, we employ risk adjusted performance measures. By using the Sharpe ratio, Sortino ratio and upside potential ratio, our analysis provides empirical evidence that fixed-income funds have been superior over the period under review. We also find high ranking correlation between the three ratios, which underlines the fact that the funds returns are normally distributed. The superiority of bond funds is evidenced even when risk-adjusted performance measures are computed gross of the expense ratio This implies that expenses are not the principal cause for the underperformance of equity funds.