Survivorship bias of unit trusts in South Africa : 2009 - 2019

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.