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Investment Style Positioning of UK Unit Trusts

Lookup NU author(s): Dr Chen Su

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Abstract

We investigate the investment style positioning of UK equity unit trusts (mutual funds) over the 24-year period from 1987 to 2010 and assess if fund manager claims to follow a particular style strategy are evidenced in practice. Generally, UK unit trusts do not, in fact, consistently track declared styles but subject their funds to style switching or rotation. Nor do funds switch to become simple index trackers, as has widely been reported, but exhibit a mix of behaviour that we refer to as ‘market-momentum styling’. Our contribution is to offer a coherent, end-to-end picture of the evolution of investment styles over an economic cycle. In so doing we evidence that fund style positioning is subject to rotation and becomes subordinated to past portfolio performance or style momentum. Even this result is conditional as we go on to demonstrate that style investment is very likely to be driven by broader economic conditions, thereby creating market-momentum styling by default. This is arguably not a style at all and calls into question the intent behind fund ‘strategies’.


Publication metadata

Author(s): Brookfield D, Su C, Bangassa K

Publication type: Article

Publication status: Published

Journal: European Journal of Finance

Year: 2015

Volume: 21

Issue: 10-11

Pages: 946-970

Online publication date: 29/04/2013

Acceptance date: 13/03/2013

Date deposited: 22/04/2016

ISSN (print): 1351-847X

ISSN (electronic): 1466-4364

Publisher: Taylor and Francis

URL: http://dx.doi.org/10.1080/1351847X.2013.788533

DOI: 10.1080/1351847X.2013.788533

Notes: Accepted for publication: 13 March 2013


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