ABSTRACT
Investors, such as private households, trustees and financial institutions, delegate the management of their wealth to fund managers. This chapter provides an introduction into the evaluation of fund managers. It considers not only how performance can be measured and assessed after it has been realised, but also provide an account of statistical methods that should allow us to spot managers who might be better skilled than their peers. The chapter presents different performance measures and motivate their economic background. The fund management industry has been growing at a high rate since the 1980s. To bring a collective investment scheme to life, the fund manager will set up a legal vehicle, such as an investment company or a limited partnership, and will invite investors to place their money with the fund. The delegated management of an investment scheme comes with costs, which include administrative cost, trading costs and, in particular, the fee that has to be paid to the fund manager.
