Comparisan in terms of return and performance evaluation of Turkish mutual funds

ABSTRACT The concepts of risk diversification and portfolio management, introduced by the seminal work of Harry Markowitz, rendered the investment companies among the most popular capital market institutions. Mutual funds, one of the most extensively operating investment companies, was introduced to the Turkish Capital Market in 1987, and recorded developments for the industry with the rapid growth of portfolios in amount and number from 1990s up until 2000s. Today, the investment companies are considered among the top institutions in providing efficiency in turning savings into investments with an increasing popularity. With the drastic growth of mutual funds, increasing emphasis has been placed on the question of proper performance evaluation. There exists three sources of controversy concerning the managed portfolio performance evaluation process; (1) the benchmark efficiency, (2) question of the use of proper and the least biased measure, and (3) the statistical power of the measure to detect the statistically significant under or over - performances. Mutual funds, as a representative of managed funds industry, have been preferred by the analysts for the performance evaluations, since they provide long-term and continuous datum unlike any other managed portfolios. The performance of a managed portfolio is a combination of both the portfolio manager's market timing and selectivity ability. A portfolio exhibiting superior performance, contrary to the efficient market hypothesis, outperforms the market as a result of the manager's ability in selecting the assets to be included in the portfolio and the market timing of buying and selling them in consideration with the market conditions. The assessment of the portfolio manager's success, on the other hand, affects the preferences of the investors among a variety of investment choices.