The Research On Sunshine Private Fund’s Performance Persistence Based On Survivorship Bias

In recent years, with the rapid growth of private wealth and the needs of capital appreciation, China’s Sunshine private funds(Trust Investment Plans), as investment institutions with good return, have been invested by many investors. And the amount of Sunshine private funds increases sharply. In 2014, there were 6074 Sunshine private funds issued, the number was significantly more than the issued in 2012, which is the biggest before 2014. The investment amount of Sunshine private funds reached 70.988 billion in 2014, which is close to the highest amount 73.1 billion in 2012. Since the second half of 2014, China’s share stock market was in a period of rapid growth and many Sunshine private funds were issued explosively. To enable more people to develop long-term financial plan of private fund investment, it is necessary to study the performance persistence of Sunshine private funds. According to the development of hedge funds in US, the delisting rate of hedge funds is quite high and has a great impact on the fund’s performance persistence because of the survivorship bias. The existence of survivorship bias may lead to higher performance of hedge funds. Zhao Danyang established first Sunshine private fund of mainland China in 2004. At that time, there are not many private funds in mainland China, and the research on survivorship bias is rare. However, in recent years, more and more Sunshine private funds are issued and private fund industry becomes a huge business, we should pay more attention to survivorship bias’ effects on performance persistence of private funds. All the scholars consider survivorship bias, the studies on performance persistence and survivorship there are many achievements of public fund’s performance persistence and survivorship bias of private funds are not enough. In this paper, we try to fill the gap of private fund’s research in China, study Sunshine private fund’s performance persistence, test the relationship between the performance persistence and survivorship bias of private funds.This dissertation is laid out as follows: The first chapter is the introduction, which includes the research background, significance, ideas and innovation points. The second chapter is the literature review, we discuss the literature of performance persistence and factors which affect the performance persistence, and we pay more attention to the survivorship bias factor. The third chapter summarizes measure methods of performance persistence, and we put forward the methodology and select the sample data. In the fourth chapter, we use grouping comparison method and runs test to analyze performance persistence and the effect of survivorship bias. The fifth chapter summarizes this paper and gives some suggestions to governments and investors.The empirical results show that the performance of hedge fund industry is good and survivorship bias effect is about 0.62%, which indicates that the ignorance of survivorship bias leads to performance overestimation. Among both of the survival funds or the entire funds, nearly 90% of Sunshine private funds are in a random walk status. We find the proportion of performance persistence accounts for 4.84% in the survival funds and 4.78% in the entire funds, which means that the performance persistence of private funds is weak. The survivorship bias exaggerates the performance persistence of Sunshine private funds, and the exaggerating rate is about 1.18%.