The Article presents a comparison of performances achieved by different funds applying different investment regulation systems with the aim of determining which system produces better results. The regulation system, which prescribes numerous strict quantitative investment limits as well as types of investments that the funds are allowed and not allowed to make, is applied by the Croatian mandatory pension funds. On the other hand, Croatian open-ended balanced mutual funds apply a system which ensures less strict investment limits and, in fact, indicates a tendency towards the application of the prudent person approach. By comparing performances achieved by the above-mentioned types of funds, which are actually very similar in terms of the asset classes they invest in but differ with regards to their investment policies defined by the regulator, we will try to establish which investment regulation system was more efficient, i.e. which system ensured the investors a more favorable risk-return profile during the observed period.
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