Closet Indexing in Czechia: An Extended Analysis
Closet Indexing in Czechia: An Extended Analysis

Author(s): Tomáš Dráb
Subject(s): Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: closet indexing; active investing; mutual funds; benchmark; Czechia;
Summary/Abstract: All active equity funds levy significant charges in exchange for an opportunity to outperform respective benchmark. However, many of these funds fail to implement active management in practice and resort to closet indexing. Evidence from abroad has shown that closet indexing has been widespread among funds offered on world’s most developed markets. The aim of this paper is a complete assessment of presence of closet indexing on Czech financial market through a deeper analysis of wide scope of funds offered to domestic retail investors. We found out that closet indexing is an issue of more than one third of the overall amount, but there is still sufficient number of truly active funds and certain signals where to expect closet indexer have been identified.

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