Performance Comparison between Open-ended Funds and Close-ended Funds in China

Abstract: In recent years, the security market of China has got a great development .The growth of security market makes the security investment funds a better circumstance to develop. After several years’development, by the end of Jun. 2007, there are 40 pieces of close-ended funds and 307 pieces of open-ended founds. The performance evaluation of opened-funds is really better than close-ended funds or there are some other factors to make the difference, this is what we are interested in.Much research has been done on the performance evaluation of funds, and some experts abroad have set up a mature and systemic theory system through decades of hard work. Related research in China is still very primary because the security investment funds appear in China for a short time. Firstly, this paper explains the conception and characters of security investment funds, reviews the development of security investment funds both overseas and in our country. Then, we theoretically discuss advantages and disadvantages of these two different organization forms funds. The third part examines and studies the theoretical bases and methods in evaluating funds performance. In the forth part, we base on the typical evaluation methods of the investment funds (Treynor performance Index, Sharpe performance Index, Jensen performance Index, T-M model, H-M model and Fama-French model) to evaluate the performance of 39 close-ended security investment funds and 87 open-ended security investment funds from Jan.2003 to Jun.2007. Finally, we point out the problems exist in the funds industry, and give some constructive suggestions including how to encourage the innovation of funds, how to promote building a scientific performance evaluation system of funds, how to encourage and cultivate agencies, in order to make the security investment funds grow better.The research makes the following conclusions:1. Looked from the returns ratio target that, all funds achievement are better than free risk interest rate in the sample time, but the funds overall achievement is inferior to the market datum combination’s, the performance of close-ended funds is better than open-ended funds;2. After the modification of the risk factor, in Treynor performance Index and Sharpe performance Index, all funds are inferior to the market, and the performance of open-ended funds is better than close-ended funds. But, we got the contrary results when we using Jensen performance Index to evaluate funds’performance;3. The evidence indicated that close-ended funds have better choosing ability both in the market opportunity and in the security than open-ended funds;4. By Fama-French model we knew again that close-ended funds have better choosing ability in the security than open-ended funds…
Key words: close-ended funds; open-ended funds; performance evaluation; security selection ability; market timing ability