The Best of Ideas Fund

Sammanfattning: We evaluated a sample of 78 diversified Actively Managed Equity Funds (AMEFs) with domestic holdings in Swedish stocks, in terms of historically risk-adjusted returns during the time period 2015-01-01 - 2019-12-31. Furthermore, we split our sample of AMEFs into two market capitalisation categories: Large/Mid-capitalisation (LMC) and Small/Mid- capitalisation (SMC). Moreover, we selected the top performing AMEFs within each market capitalisation segment (12 in the LMC and 6 in the SMC) by deriving estimates for Jensen ́s alpha as well as the Sharpe-ratio to test the robustness of our results. Based on fund holdings information for the top performing diversified AMEFs, we created our own two, potentially alpha superior funds, where the stocks commonly held overweight across these diversified AMEFs are composed into concentrated portfolios. Our two own funds, also separated by the two market capitalisation categories in order to avoid an “apple to oranges comparison”, are named the “Best of Ideas Funds” (BoIF). In line with previous research regarding the risk- adjusted performance of concentrated portfolios, we evaluated whether our concentrated BoIFs had been able to beat the market during the studied time period as well as their diversified peers, from which the BoIFs are constructed, in terms of risk-adjusted returns during the five-year time period. Our findings suggest that both BoIFs were able to beat their respective index benchmark to a significance of 95%, specified as the market. Moreover, only the SMC BoIF managed to outperform its diversified rivals with certainty. Thus, we decided to analyse the properties of the stocks found in our BoIFs. We concluded that there is clear concentration of stocks in a few particular sectors, more specifically, the financial, industrial and consumer goods sectors.