Relationship between size and performance of South African unit trust funds

Abstract

This study investigates the relationship between unit trust fund size and the net of fee performance of actively managed South African unit trust funds. Although a slight, yet significant, negative relationship between unit trust fund size and performance is documented, no difference was found between the mean performance of small and large South African unit trust funds. This finding suggests that the slight negative impact of fund size on unit trust performance was most likely outweighed by the positive impact of fund family size on unit trust performance. Therefore, depending on the characteristics of the organisation to which a fund belongs, increased fund size should not necessarily detract from fund performance. Furthermore, fund size was found to be a weak determinant of unit trust performance, with more than 99% of the variation in unit trust performance explained by factors other than fund size. The findings of this study suggest that fund size should be given very little, if any, consideration when assessing the future return potential of South African unit trust funds.