Title: Construction properties of equity fund of funds: a preliminary note from the Greek market

Authors: Aristeidis Samitas, Eleni Stavridou, Ioannis Asimakopoulos

Addresses: Department of Business Administration, Business School, University of the Aegean, 6 Christou Lada Street, Office 15, Athens 10561, Greece. ' EFG Eurobank S.A., 8 Othonos Street, Athens 10557, Greece. ' Department of Economic Research, Bank of Greece, 21 El.Venizelos Street, Athens 10250, Greece

Abstract: This study examines return and risk properties arising from the construction of fund of funds (FoF) portfolios utilising actively managed Greek equity mutual funds. The evidence documents that while average return remains constant as the number of funds included in the FoF increases, risk is decreasing leading to improved generalised Sharpe ratios. At the same time, skewness and kurtosis coefficients present small deterioration. The investments strategy employed for the construction of a FoF plays its role: the choice of funds having good past performance results to FoF presenting properties that outperform not only the simple naive strategy, but also the composite index of Athens Exchange. Finally, the benefits of a FoF are maximised with the inclusion of only a small number of funds.

Keywords: FoF portfolios; fund of funds; simulation; investment strategy; equity funds; return; risk; Greece; equity mutual funds; skewness; kurtosis.

DOI: 10.1504/IJCEE.2011.040577

International Journal of Computational Economics and Econometrics, 2011 Vol.2 No.1, pp.63 - 73

Published online: 07 Jun 2011 *

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