Style Analysis and Performance Evaluation of Dutch Mutual Funds

In this paper we show how style analysis of mutual funds can be used to circumvent the problem of self-reported investment styles, and to improve relative performance evaluation. Subsequently, we relate style analysis to performance evaluation and present results on the performance of Dutch mutual funds. Most strinkingly, Dutch mutual funds that mainly invest in Netherlands equity show relative outperformance of the passive portfolio of indices reflecting the mutual fund's investment style. Moreover, the same group of funds provide an extension of the mean-variance efficient investment set for Dutch investors, even after taking short sales restrictions into account, indicating that a domestic market effect might be present.