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This paper combines the use of portfolio holdings data and Principal Component Analysis to create synthetic fund indexes. Synthetic funds are funds portfolios which aim to duplicate a fund market in order to represent alternative benchmarks to compare the performance of investment funds. Our weight-based measure has several advantages. Using the principal Component Approach, it avoids biases in linear weighting scheme of portfolios, reducing the dimensionality of the data and keeping the representatively of financial markets. Synthetic Fund Indexes permit to better compare fund markets when structural information of returns is used, means-based measures face a bias if managers can trade between observation dates. The new measures avoid this interim trading bias. We use our benchmark to provide insights about performance in a sample of equity investment funds of 5 countries. By constructing indexes from data collected in different time periods, some conclusions are drawn about the consistency of our results.

Auteurs :Terraza Virginie
Extrait de la revue BMI 114