Is the Critique of Active Funds Fair? Measuring Skill and Scale in the Danish Mutual Fund Industry

Anthon Hofman Laursen

Student thesis: Master thesis


This paper empirically examines the skill of actively managed Danish mutual funds from 2005 to 2019. The study finds evidence that actively managed funds are more skilled than previous research suggests. The evidence shows that the scale of a fund and industry negatively influences a fund’s excess returns after fees. The average fund generates about 12.4 million DKK in abnormal value yearly, but the value is on average not shared with the investors after fees. A retail investor can subsequently earn zero excess returns despite investing with a skilled fund. Nevertheless, the findings suggest that retail investors are not using an appropriate market benchmark when choosing a mutual fund. Finally, the study indicates that scale has a greater influence than the expense ratio on investors’ excess return.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2020
Number of pages98