Abstract:
This report examines the survivorship bias that exist as a result of unit trust fund
closure in South Africa. Only one previous study had been completed on survivorship
bias of unit trusts in South Africa in a previous time period, although many exist on
unit trust performance. This report aimed to widen the sample and therefore included
all unit trust categories. The number and presence of fund closures, fund failure rates
and survivorship bias were analysed according to category, fund size and
management company over the sample period.
The findings show that failure rates increase the longer the time period, and that
smaller funds are more likely to fail. Contrary to other research, survivorship bias
estimates yield similar results over 10 years using equal- and size-weighted
methodologies. Negative biases are also shown to exist at category and
management company level. Survivorship bias was shown to exist over multiple time
periods and that closed funds underperformed relative to surviving funds.
