Performance and risk of Brazilian equity mutual funds in the context of the covid-19 pandemic

The goal of this research was to analyze how Brazilian equity investment funds behaved during the Covid-19 period. The analysis was divided into 3 sub-periods: (i) pre-crisis (2019-10-03 to 2020-01-31); (ii) crash (2020-02-19 to 2020-03-23); (iii) and recovery (2020-03-24 to 2020-04-30. The main results showed that during the crash period, in all the categories, more than 50% of the funds obtained a return superior to that of the IBRX100. However, in the recovery period, the scenario is reversed and the vast majority of funds start to underperform the index. However, when performance is analyzed from the perspective of multifactor risk models, it is possible to identify positive alpha generation during the pre-crisis period and negative (destruction of value) during the crash period. In addition, when examining fund flows, it can be seen that there was no "run on the fund" phenomenon to redeem the shares. Actually, in the analyzed period, the inflows surpassed the redemptions. This may indicate that the fund investors are financially more educated and that he or she acted with more caution when waiting for a less turbulent moment. The article concludes that the industry was coming from an excellent performance in the pre-crisis period, which was interrupted by a period of value destruction during the moment of the greatest turmoil, and that, finally, during the recovery period, the performance was below the market index, but without generating or destructing significant value.