| The development of China’s fund industry, started from securities investment funds, has gone through14years. From the closed-end funds to the open-end funds, the capital market funds to the money market funds, the domestic fund companies to the joint venture fund management companies, the fund industry has experienced three historic leaps. With continuous development of China’s fund market, fund performance evaluation has already become an important concern. Fund performance evaluation market has rapidly developed and mature fund performance evaluation will play an important role. From the perspective of investors, objective fund performance evaluation can provide investors with more information; from the aspect of the fund companies, fund performance evaluation can help them better understand their own strengths and weaknesses and urge fund companies to adjust their own management; from regulatory agency’s perspective, fund performance evaluation can provide reference information.At present, the development of foreign fund performance evaluation agencies is more mature, and it plays a significant impact on the fund market. In the United States,80%of the fund investment is affected by the results of Morningstar rating. More than90%of new capital goes to the top three. In China, the fund industry has a relatively short history, so the fund performance rating market is not mature enough. Fund performance evaluation study in China has focused on the introduction of foreign traditional methods. Researchers used empirical methods to prove China fund data, although they got a lot of results, but lack of innovation.This paper chooses fund performance evaluation as the object of study. It divides into two parts. The first part introduces domestic and foreign fund rating agencies, including basic information, fund classification criteria, and classification results, the main methods and steps of fund rating. On this basis, author compares the domestic and foreign rating agencies and gets important results. The second part is the main part of this paper. At first, author introduces traditional methods and factor analysis, and then chooses68stock funds which established in China before December31,2006as sample funds. Through empirical analysis, the paper gets several traditional indexes which can reflect overall performance and decomposition performance. And then, author chooses12traditional indicators to do factor analysis and gets three important factors which can reflect funds’comprehensive performance. The three factors can be named as income factor, select factor and risk factor. These factors include more than91%information of the original12indicators. At last, this paper compares the result on the basis of factor analysis with the result of Morningstar rating. The conclusion shows that the method of factor analysis can be more comprehensive to assess fund performance.The results and conclusions of this paper are as follows:(1) Domestic and international rating agencies have their own characteristics. Foreign rating agencies have higher independence than domestic ones. The S&P, Morningstar and Lipper have become the three pillars of U.S fund rating. The S&P’s feature is the "Alternative Fund" list, and Morningstar can provide customers with more data service, and Lipper can do more from the aspect of investors. Compared to foreign rating agencies, the ones in China have an obvious gap in terms of index selection and standard portfolio selection. The foreign rating agencies can evaluate fund performance from the qualitative aspect. There is a lot of room for improvement of domestic ones, but it also reflects that there is a potentially huge development space for domestic fund performance agencies and market.(2) This paper uses traditional methods to assess the performance of68sample funds. Through theory and empirical study, it gets several indicators. The indexes, such as Treynor index, Sharp index, Jensen index, information ratio, the M2index, M.C.V index, Sortino ratio, can reflect the funds’ overall performance. More than half of the sample funds have a better performance than the market standard composition. The indicators, such as α,β of the model T-M, H-M and C-L, can reflect decomposition performance of sample funds. The empirical results show that there are49sample funds show good stock selection ability of the three models and17sample funds show good time selection ability of the three models, and6samples exist both two kinds of abilities of the three models. The results show that managers of equity open-end fund in China can perform well in some aspect but lack of comprehensive capabilities.(3) On the basis of the indicators above, this paper chooses factor analysis to do further analysis. The chosen indicators are simple income indicator, the simple income indicator’s standard deviation, beta, Treynor index, information ratio, M.C.V index, Sortino ratio, Modificatory R2, α and β values in the models of H-M and T-M. Through factor analysis, author extracts three common factors, representing the level of return, risk and ability of selection. The three indicators include more than91%information of the original12indicators. The three common indicators can get a new comprehensive index to reflect the performance of sample funds. The new index scores and ranks the sample funds. In order to test the ranking, this paper compares the ranking based on factor analysis with the ranking of Morningstar method. The result shows that there is a highest correlation between Morningstar ranking and income indicators ranking, and a higher correlation between Morningstar ranking and comprehensive indicator ranking, so we can get that fund performance evaluation method based on factor analysis can not only reflect the income of fund, but also cover the risk, stock and timing selection abilities. This method can assess fund performance in more aspects.At present, China’s fund performance evaluation still remains in the stage of learning from foreign research to do some empirical research, while this paper is trying to combine traditional methods with factor analysis in order to assess fund performance in a more comprehensive angle, and author also tries to compare the result of factor analysis with the result of Morningstar method. But due to the limited level, there are still some shortcomings which should be improved in the future research. |
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