New Zealand unit trust disclosure: asset allocation, style analysis, and return attribution

Abstract

Purpose

This article aims to explore three facets of the historical performance of a sample of actively managed unit trusts available to New Zealand investors: asset allocation, style analysis, and return attribution.

Design/methodology/approach

Because New Zealand does not require unit trusts to disclose their security holdings, the paper used returns‐based style analysis to infer how these trusts have allocated their funds among asset classes.

Findings

The research has found that, for unit trusts available to New Zealand investors, asset allocation can explain a significant amount of the differences in return across time and between trusts. Across time, asset allocation accounts for about 80 per cent of the variation in actual return. Between trusts, asset allocation explains about 60 per cent of the variation in returns. From either perspective, the choice of asset allocation is an important factor in explaining returns.

Originality/value

The paper suggests that active management barely earns its fees and that passive investments might do as well or better.

Citation

Fowler, R., Grieves, R. and Clay Singleton, J. (2010), "New Zealand unit trust disclosure: asset allocation, style analysis, and return attribution", Pacific Accounting Review, Vol. 22 No. 1, pp. 4-21. https://doi.org/10.1108/01140581011034191