Thesis submitted in fulfilment of the requirements for the degree Master of Technology: Design in the Faculty of Informatics and Design at the Cape Peninsula University of Technology 2013 / As healthcare is such a widespread issue in South Africa, this research focuses on non-profit organisations in the health sector. Non-profit organisations take on much of the work that the government cannot deliver with respect to the overall wellbeing of patients at hospitals, in specialised care, in basic healthcare, and most significantly, in areas where private healthcare is unaffordable. This study investigates online marketing, fundraising activities and strategies of non-profit organisations in Cape Town’s health sector. It illustrates the growing popularity of these channels, and argues that many non-profit organisations are not using online marketing tools effectively to raise the funds and support they need. Two longstanding non-profit organisations based at the Red Cross War Memorial Children’s Hospital, are the subject of the study, as this hospital is a prime example of how a government-run institution relies on the support of effective non-profit organisations. The conceptual framework required extensive reviews of the existing literature on the South African non-profit sector, the health sector and the role of non-profit organisations in these sectors. Furthermore, it reviewed successful marketing practices for non-profit organisations, including appropriate online marketing and fundraising strategies. A qualitative and quantitative research approach was employed, using semi-structured interviews and an online survey of twenty-seven health sector non-profit organisations. Key people in the non-profit health sector, the non-profit communication design sector and the corporate online marketing sector were interviewed. The online survey was conducted to gain a clear insight into the current online marketing practices and activities of Cape Town based health sector non-profit organisations. Grounded theory was used as an analytical tool in this research where themes emerge and theory is constructed based on insights and knowledge gained during the research. The results reveal that many non-profit organisations in the Cape Town health sector do not seem aware of the benefits of implementing an online marketing and fundraising strategy. This study concludes that online marketing and fundraising is vital for a non-profit organisation’s success. It is recommended that all members of non-profit organisations learn as much as they can about the importance of online marketing, as well as the importance of having a solid strategy. A unique framework for branding, strategy, online marketing and fundraising is proposed as a solution to the research problem, and further recommendations include the design of a textbook or eBook and an online platform connecting non-profit organisations in the health sector in South Africa.

Abstract This doctoral thesis aims to contribute to the literature on hedge fund performance and risk by conducting four interrelated essays. The first two essays measure and predict hedge fund performance using novel methodologies based on recent development in portfolio choice techniques. This new way to evaluate fund performance relies on economic theory and robust econometric principles. The first essay exploits hedge fund characteristics in order to pick right funds into a portfolio, whereas the second essay predicts hedge fund performance using conditional information that is contained in macroeconomic variables. The empirical analysis shows that the proposed conditional real-time portfolio strategies deliver significant outperformance over the unconditional benchmark strategy which does not utilize conditional information. The third essay investigates whether a particular hedge fund with specific fund characteristics contributes to systemic risk and how hedge funds with a high systemic risk contribution perform during the times of financial distress. The findings suggest that the fund’s capital structure is related to its systemic risk contribution, and, furthermore, that hedge funds with a high systemic risk contribution tend to deliver extremely poor performance during the times of financial distress. The fourth essay examines the impact of share restrictions on hedge fund performance and risk-taking. The essay finds that hedge funds with a lockup period tend to take excess risk that is not compensated when performance is measured as a unit of risk taken by the hedge fund. In addition, the length of notice periods increases along with the illiquidity level of fund investments. Finally, hedge funds with a long notice period seem to be able to earn an illiquidity premium.

This thesis consists of one hedge fund study and two credit default swap (CDS) studies. The first study investigates the relationship between mega hedge funds (the largest 25% of funds) and two bond yields (U.S. Treasury yield and Baa yield). Using a merged sample of 9,725 hedge funds from 1994 to 2012, I find that hedge fund outflow produced a more significant relationship than inflow, and the dollar outflow of large hedge funds can predict the increase in the bond yields. The association is also more pronounced for large funds with a short notice period prior to redemption. The results suggest that hedge fund flows provide predictive information for the movement of bond yields. The second study investigates the systematic and firm-specific credit and liquidity risks of CDS spreads. Using data on CDS spreads of 356 U.S. firms from 2002 to 2011, I find that systematic credit and liquidity risks are important in cross-sectional prediction of CDS spreads. In addition, the importance of systematic liquidity risk becomes substantial since the financial crisis in 2007. This finding challenges the current Basel III procedures for counterparty credit risk regulations, in which only pure default should be used. In addition, the systematic credit and liquidity factors can be used as a proxy for CDS spreads of firms that do not have traded CDSs. The last study extends Carr and Wu (2010), in which deep out-of-the-money (DOOM) put options and CDSs are associated as they both provide credit insurance for credit protection buyers. Using the Nelson-Siegel (1987) model, I obtain the credit and illiquidity components for DOOMs and CDSs over the period from May 2002 to May 2012. I show that, after controlling the factors that explain the difference between the DOOM and CDS markets, the components converge over time in these two markets. Thus, I can exploit the observed convergence pattern by constructing a simple trading strategy, and this benchmark strategy produces a positive return. I further construct two other strategies based on the component information, and these two refined strategies outperform the benchmark strategy by the Sharpe ratio and Carhart alpha. My three studies contribute to the literature in hedge fund systemic risk and CDS credit and liquidity risks.

Diploma work consists of two parts. Teoretical parts is based on characteristic of non-profit organizations, their specific finance and budgeting, their system of accounting and problematics of funds creation and usage.

Sammanfattning Beteendeekonomi var fram till år 1979 ett forskningsämne som saknade större motsättningar. Sedan 1700-talet var den allmänna uppfattningen att de beslut som individer fattade under risk var baserade på ett rationellt beteende. Daniel Kahneman och Amos Tverskys åsikt var polär mot den tidigare forskningen och baserat på deras kritik mot föregående studier inom beteendeekonomi presenterade de år 1979 prospektteorin, en teori som senare renderade i nobelpriset. Därefter har teorin utvecklats och år 1992 publicerade Tversky och Kahneman den kumulativa prospektteorin. Den kumulativa prospektteorin (1992) baseras på att individer frångår objektiva sannolikheter och istället utgår beslut från subjektiva preferenser och därav ett irrationellt beteende. Kahneman och Tversky ansåg att rationella individer inte alltid fattar beslut baserat på vilket alternativ som genererar den högsta nyttan utan tidigare erfarenheter och upplevelser resulterar i att individer agerar annorlunda. Ett flertal studier har funnit empiriskt bevis för att den kumulativa prospektteorin är applicerbar på investerare, däribland på förvaltare inom fonder samt inom private banking. Denna studies syfte är att med hjälp av tolv kvalitativa intervjuer erhålla en djupare förståelse huruvida den kumulativa prospektteorin är applicerbar på svenska fondförvaltare med inriktning på företagsobligationer. Samtidigt som allmänheten enligt de intervjuade förvaltarna tenderar att ha bristfälliga kunskaper gällande risker associerade till företagsobligationer anser många journalister, bland annat på grund av de förväntade räntehöjningarna, att obligationsmarknaden befinner sig i en bubbla. Detta gör företagsobligationsmarknaden intressant att undersöka. Studiens slutsats är att förvaltarna, i likhet med den kumulativa prospektteorin, agerar irrationellt vid investeringsbeslut. Detta på grund av att förvaltarna ger indikationer på att de inte enbart investerar i de företagsobligationer som genererar den högsta nyttan, det vill säga avkastning, utan tar stor hänsyn till risker kopplade till företagsobligationer. I likhet med teorin tenderar förvaltarna att hantera likviditetsproblematiken och kreditrisken i enlighet med den kumulativa prospektteorin. Vidare är studiens slutsats att förvaltarna, i kontrast till den kumulativa prospektteorin, övervärderar en redan hög sannolikhet för att ränte- och inflationsrisken ska påverka fonderna negativt. Dessutom ges indikationer att förvaltarna, i likhet med teorin, agerar riskavert mot vinster, men i kontrast till teorin, agerar de också riskavert mot förluster. Detta stöds bland annat genom att majoriteten av förvaltarna agerar med en hög grad av försiktighet samt deras bemötande av kreditrisk.

This thesis is an attempt to advance our understanding of investor behaviour in one of the world’s largest markets, i.e. the mutual fund industry. It consists of three essays that answer the following questions: Does investor fund-selection ability explain the impressive growth of the U.K. mutual fund industry? Does the behaviour of U.S. mutual fund investors vary across the business cycle? And, how do investors react to U.S. mutual fund name changes? The first essay explores the role of investor fund-selection ability in explaining the growth of the mutual fund industry given that previous studies find that mutual funds underperform their benchmarks on average. I examine such ability in the context of the remarkable growth experienced by U.K. mutual funds during the decade of 2000-2010. Using three alternative measures of selection ability and two for performance measurement, I find that fund-selection ability is explained away by the momentum factor due to investors naively chasing recent winners. In addition, this essay is the first to examine the impact of fund visibility on selection ability. I find that fund visibility is an important factor in the investment decision-making process, and one that fund managers can potentially manipulate to their advantage. The second essay is motivated by recent findings that benchmark-adjusted returns to the fund industry are positive in periods of economic contractions. Previous literature is silent on investor behaviour in the face of superior average returns. This essay fills the gap in literature by examining investor’s fund-selection ability across the business cycle. I examine U.S. fund data from 1970-2011 and find that while genuine selection ability does not exist in any period, investors do behave differently across the business cycle. Specifically, investors no longer chase recent winners during contractions, despite no change in fund performance consistency. Instead, I find that investors are more concerned about controlling their risk exposure, especially to the market, during periods of economic downturn. The third essay examines investor reactions to U.S. mutual fund name changes, following the adoption of a new SEC ruling in 2001 to curtail misleading names. We uncover striking evidence that funds continue to undertake cosmetic name changes, and that such changes appear to mislead investors. I find that investors react more positively to cosmetic name changes than non-cosmetic ones. This result is not driven by marketing efforts. Instead, further examination reveals that this arises because cosmetic name changes frequently include industry ‘buzzwords’ in the new name, a tactic that is rewarded with higher flows to such funds. I also find that additional name changes by a fund continue to attract significant flows, although the magnitude of the flows decreases over each successive event. This essay provides compelling evidence in favour of investor irrationality and has implications for both practitioners and academics.

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In this dissertation, we examine whether the disposition effect, the tendency to sell winners and hold losers, exists among U.S. equity mutual funds and how the disposition effect influences fund performance and particularly flows. We find that a significant fraction (32%) of all funds exhibit some degree of disposition behavior. These funds underperform funds that are not disposition prone by 4-6% per year. Moreover, we find that the disposition effect has a significant impact on future fund flows. Without controlling for performance, disposition-prone funds experience 2-3% less flows each quarter than other funds. The difference in flows is probably due to poor performance of such funds. However, even after controlling for performance and other factors that potentially influence flows, funds with a high disposition effect experience 0.7-2% less flows than funds without such behavior. Past research has found that funds with low tax overhang garner larger inflows. Though disposition-prone funds are likely to have a lower tax overhang because they sell their winners quickly, we find that fund flows to disposition-prone funds are smaller than flows to non-disposition oriented funds after controlling for tax overhang. These results suggest that performance and tax efficiency as well as tax overhang are all important to mutual fund investors. / Ph. D.

Many studies have been published on active versus passive management, yet there was a significant gap in how Scandinavian-managed equity funds perform during intense crises, specifically the 2019-2023 period. The study investigated whether Scandinavian actively managed funds could achieve higher risk-adjusted returns than Scandinavian passively managed funds during two intense crises, Covid-19 and the Russian-Ukraine war. The efficient market hypothesis (EMH) was introduced to analyze markets' efficiency and help determine active managers' ability to outperform passive funds with market information. The data consisting of 95 funds was analyzed with a direct quantitative comparative analysis guided by objective ontology and positivist epistemology. To analyze the data over time, a cross-sectional time series was implemented to analyze patterns during the five-year period. The comparison between active and passive funds was performed with the risk-adjusted return, measured by the Sharpe ratio. Our findings showed consistent results that active fund management lacks a significant advantage over passive index funds in four out of five portfolios, aligning with our hypothesis. The results also support the EMH, suggesting that there is market efficiency. The findings provide implications for investors' decision-making process as the study contributes to the discussion on whether active or passive funds are the superior choice. During the period of 2019-2023, the optimal investment decision to achieve the highest risk-adjusted return was to invest in passively managed funds. While the research acknowledges behavioral aspects of fund managers during crises, future research should delve deeper into qualitative factors influencing the management strategy.

The master thesis deals with collective investment possibilities in Czech Republic designed for small investors with focus on instruments carrying very low risk. The goal is to assess these possibilities and their mutual comparison according to their return and risks. Special attention is devoted to protected mutual funds, as popular instrument of risk-averse investors.