Efficiency based performance valuation of mutual funds in Turkey

After the activation of the Turkey Electronic Fund Trading Platform (TEFAS) by Custody Bank and Central Registry Agency (CRA) of Turkey in 2015 with the aim of strengthening the role of individual investors and accelerating the development of the mutual fund industry, the importance of mutual fund performance evaluation studies has increased. Well-rounded evaluation studies including factors such as cost of funds and the fund's share in the industry will support individual investors efficiency, who obtain the opportunity of direct participation in the industry and management of their own investments, and play a complementary role in the development of the system. In this study, performance evaluation of Turkey's mutual fund industry is considered from an alternative perspective to traditional evaluation methods and efficiency valuations based on the number of investors, asset values and market shares of the funds with certain risk and cost degrees are performed. Excluding pension funds and exchange funds, efficiency analysis of 213 mutual funds operating between 2013-2015 is carried out using Data Envelopment Analysis (DEA) method under 15 sub-categories. Annual efficiency scores are obtained with output oriented models under the assumption of variable returns to scale and the change of each fund's and fund category's efficiency scores over three years are calculated using Malmquist index. Keywords: Mutual funds, Performance evaluation, Data envelopment analysis, Turkey Electronic Fund Trading Platform, TEFAS