Performance evaluation of investment funds with a DEA approach

Abstract

This work aims to describe how investment funds works and how to valuate their performances. First of all, there are illustrated, in general terms, several types of investment funds classified by purposes, accessibility and fund's management bias. Then, it will be described with which instruments it is possible to measure the performance of portfolios returns: the most known are the Sharpe, Jensen, Treynor and Information ratios, but we will explain in detail, all the ratios that can be used to perform this kind of valuation. Furthermore, I will approach the DEA (Data Envelopment Analysis), describing all the features, purposes, and applications that can be applied for what concern the performance valuation of investment funds. More in detail, we will treat generic and more specific DEA models, along with practical examples, applied to real investment funds based on the US and EU markets.