| Abstract [eng] |
The main purpose of this master thesis is to create a methodology for performance evaluation of mutual funds and, in turn, evaluate whether sustainable mutual funds which invest in equities issued by large European companies generate not lower returns on investment compared to corresponding traditional funds. The work consists of four main parts: the analysis of literature, the methodology, the research and its results, conclusion and recommendations. Literature analysis contains the concept, strategies and social benefits of sustainable investments as well as the reasons for rapid development. This section also reviews previous researches which investigated the performance of sustainable and traditional mutual funds. The research methodology contains the purpose of research and its main stages. In order to evaluate the performance of sustainable mutual funds descriptive statistics and multifactor regression analysis were used. Sustainable funds were compared to traditional mutual funds, additionally using a well diversified benchmark index as a proxy. Methods like cumulative and annual returns, standard deviation, Sharpe ratio, skewness and kurtosis coeficients were used to evaluate the returns and risks of funds. CAPM, Fama – French 3 factor and Carhart 4 factor models were used in order to identify the most important factors affecting the returns and compare the performance of sustainable funds to their traditional counterparts. The performed analysis of standard deviation and Sharpe ratio revealed that sustainable funds are appropriate mean to hedge against market fluctuations. Additionally, sustainable funds overperformed their traditional counterparts in case when benchmark index was considered as market portfolio while there were no clear dominance of either investment style in case when European market portfolio was considered as market portfolio. Therefore, it is concluded that European sustainable funds generate not lower returns on investment compared to corresponding traditional funds. Moreover, Fama – French 3 factor model is considered to have the best explanatory power of the sustainable and traditional funds‘ returns during the research period. The conclusions and recommendations summarize the main concepts of literature analysis as well as the results of the performed research. The author believes that the results of the study could give useful guidelines to the practical evaluation of funds while choosing between investment opportunities and to future theorethical research of sustainable mutual funds performance, especially with the respect to evaluating the increasing regulatory framework. |
