Active funds vs benchmark index

Abstract

This thesis is investigating the performance of actively managed equity funds in comparison to their benchmark indexes. Four sectors including technology, smallcap, value and real estate companies are evaluated during the period Q1 2014 - Q1 2025. Using quantitative measures such as sharpe-ratios and OLS-regression based on CAPM, the study shows that actively managed funds don't consistently outperform their respective benchmark indexes. However, differences between the sectors are evident. The smallcap funds significantly outperformed the benchmark index in absolute returns and risk-adjusted returns using sharpe ratios and OLS-regression. The technology funds underperformed in total returns but showed higher risk-adjusted returns in sharpe and OLS-regression. In contrast to technology and smallcaps, the value funds lagged in all of the performance metrics. Real estate funds outperformed in the metrics but with lower statistical significance in the OLS-regression compared to the other sectors. The general findings support the EMH (Efficient Market Hypothesis) in mature sectors but indicate that there are opportunities to achieve alpha in less efficient market segments for actively managed funds.