Academic Research

PureGroup’s Forward Perspective Model is a quantitative analytical model that anticipates an investment productʼs behaviour to the range of macro-economic factors and how different funds are likely to react as the economic cycle progresses.

The PureGroup Forward Perspective Model was developed in partnership with Parala Capital and based on the work of their resident Professors, Allan Timmermann and Russ Wermers, which has been published in the Journal of Financial Economics in 2006 and 2013 as a method to capture the predictability of returns.

Investing in mutual funds when returns are predictable

Doron Avramov, Russ Wermers
February 2006

Abstract

This paper forms investment strategies in US domestic equity mutual funds, incorporating predictability in (i) manager skills, (ii) fund risk loadings, and (iii) benchmark returns. We find predictability in manager skills to be the dominant source of investment profitability—long-only strategies that incorporate such predictability outperform their Fama-French and momentum benchmarks by 2 to 4%/year by timing industries over the business cycle, and by an additional 3 to 6%/year by choosing funds that outperform their industry benchmarks. Our findings indicate that active management adds significant value, and that industries are important in locating outperforming mutual funds.

The Cross-section of Conditional Mutual Fund Performance in European Stock Markets

Ayelen Banegas, Ben Gillen, Allan Timmermann, Russ Wermers
August 2012

Abstract

This paper implements strategies that use macroeconomic variables to select European equity mutual funds, including Pan-European, country, and sector funds. We find that several macro-variables are useful in locating funds with future outperformance, and that countryspecific mutual funds provide the best opportunities for fund rotation strategies using macroeconomic information. Specifically, our baseline long-only strategies that exploit time-varying predictability provide four-factor alphas of 12-13%/year over the 1993-2008 period. Our study provides new evidence on the skills of local versus Pan-European asset managers, as well as how macroeconomic information can be used to locate and time these local fund manager skills.