Style Analysis: Is it Useful in Analysing New Zealand Managed Trusts?

This study evaluates the practicability of style analysis in evaluating the risk‐adjusted performance of New Zealand's retail equity trusts. The size of the New Zealand market and the short history of data available generate doubts concerning the usefulness of style analysis under these conditions. Style analysis provides useful insight when applied to the New Zealand retail equity unit trust sector. Two prevalent styles are identified, a large cap style and a mid‐cap‐value/small cap style. Little variation in style was detected for the group of trusts that tracked the large‐cap equity index but substantial variation was indicated in relative performance versus a passive investment in their style benchmarks. Significant variation was detected, both in terms of style and relative performance of trusts that tracked a mid‐cap‐value/small‐cap index. A small number of New Zealand equity managers were able to maintain a consistent style, while meeting or beating the performance of their style benchmarks.