China Securities Investment Fund Performance Evaluation System Design

Although the first investment fund had been founded for only five years, it has become a kind of important and popular instrument in China. Because investors always make their investment decision on the basis of performance of funds, it is necessary and urgent to construct an objective and just funds' performance evaluation system.This paper constructs a equity fund performance evaluation system according to domestic practice by reviewing foreign evaluation methods. The system consists of three parts, i.e. the risk-return characteristic of funds, the liquidity of their assets, and the level of investment management. This paper establishes an integrated evaluation function by factor analysis and determines the rates of funds by cluster analysis.In the last section, an empirical research is done. First, the author confirms that there is not significant relation between fund return and size as well as investment style by examining the data of closed-end funds. It is also proved that the evaluation method is feasible by evaluating the closed-end funds and open-end funds in China respectively. The author compares risk-return character between closed-end funds and open-end funds and the results show open-end funds' performance is not better than that of closed-end funds according to their risk-return character.