Study of UK Unit Trusts from 2000 to 2009

Document Type:Dissertation

Subject Area:Finance

Document 1

5 trillion in 2000 to US$ 84. 7 trillion in 2010 – these have also been under the management of the global fund management firm. Pension assets have acquired the largest share in the conventional assets, contributing to 54 percent of the total amount which includes US$ 20. 3 trillion that is put in the mutual funds as an investment and another US$ 20. 1 trillion invested in the insurance funds. • There are claims that stock market can be back dated. This is possible in the findings of Eugene Fama (1965) when he came up with the EMH –Efficient Market Hypothesis. The EMH suggests the efficiency of the stock market, that it is a market where the available information is fully reflected by the prices of the assets. The better part of the financial community accepted the hypothesis.

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Due to this, it was later on interpreted as the random walk where stocks follow a very well defined random behavior and so there are no discovered trading rules that can outsmart the random decision. Unit trust are generally established under the law of trust where trustees are the custodian actors of any security (ies) on the principle’ behalf – beneficial owner though with a different company that manages asset and must be in pursuing specific objectives of the investment within the trust deeds (Samoa, 2015). Investors are unit holders and are the first party while the second party is the fund managers whose main role is to run the trust and manage the funds invested. There are also the third parties who in this case are trustees whose major role is to monitor the performance of the fund managers which should be in relation to the trust deeds.

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The trustees’ roles are grounded in the constitution under the Trust Companies Act of 1967. The assets are always held for the unit holders in “in trust”. By the year 2000, the number has grown to over 2000 investment funds (Toporowski, 2015). Literature Researchers have come up with so many research that have explored the performance of the mutual fund but generally literature of the performance evaluation can be categorized into two:- one that attempt the empirical results discovery –the extents to which the mutual funds outperform, and the second focuses on the theoretical development. Even though most research works tends to explore both sides, 78 percent aim at detecting whether the portfolio managers are in possession of hidden abilities that can outperform their counterparts.

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This is so possible with their empirical test analysis and some other relevant interpretations. In order to do so, different models are applied and their attention and concentration is to seek the best and dependable model that yields the smallest error in pricing with the least biased results ever (Lomas, 2015). They are the parametric constrains that is generated through the return process. The only problem which engulfs this method is the occasional misleading results especially when there is a mis-specification in the proposed process of generating the returns (Hallam, 2017). More recent developed model has more advantages than the aforementioned model. The most recent one is called SDF – Stochastic Discount Factor mode. It tests and is equally able to estimate the pricing implications and the parameters respectively.

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2000-2010 Jordan 2500 funds Micropal Limited Net income & bid prices on returns of the monthly net. Timna (2013) 2009 D. E Kenny (2014) 131 funds DataStream Closing price 2002--2010 The only available data could only be obtained from the Data Stream International Database. The data obtained is totally different from the rest but are the best for this study. Reference Variables These variables should reflect the available assets to fund managers and investors, a finite sample can be used though. Unit trusts is divided into two categories, the first category deals with the distribution of dividends on regular basis and the second category deals with the accumulation of dividends that are within the trust unit. Those shares that are categorized under the income type, information may not be necessarily available so the selection of accumulated type of unit trust was done in order to aid in the calculation of the total return but on the price basis.

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The sample collected included the 16 growth funds, 29 income funds and 25 general funds. The following among them have been dead or merged 5 growth funds, 13 income funds and 12 general funds, since January 2000. Stationarity This can be defined as a constant of covariance, variance and mean of each given lag. 303 Maximum 34. 68% Kurtosis 8. 228 Std. Dev. 049 Median 1. Dev. 046 The table below describes the statistics of the reference variables. This is the gross return on a monthly basis of the benchmark portfolio. They are passive buy & hold industry. The information herein is retrieved from Data Stream. 508 CHAPTER FIVE CONCLUSION The paper briefly introduced the UK asset management on the onset and some of the trending issues. It then attempts explaining the difference that exists between the OEIC and the UK unit trusts.

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