Performance Assessment of Pakistani Islamic Mutual Funds

Abstract

The objective of the paper is to explore the performance of funds especially during crisis time period, impact of fund size on performance and rank funds on the basis of performance. For this reason, this study was conducted on Pakistan and Malaysia and performance is compared in both markets. Time span for the study is from January 2007 to December 2015. This whole time period covers global financial crisis as well, so performance was analyzed in bull and bear market. For performance measure, five different ratios are employed namely Sharpe ratio, Treynor ratio, Jenson Alpha, Sortino ratio, and Information ratio and for finding the link between fund size and fund performance, Pearson Correlation is employed and ranking of the markets is done by employing TOPSIS method. It is found that crisis is having direct impact on fund performance and that fund managers in both markets are risk averse most of the time, they are not performing well in comparison of market and performance in comparison of risk free securities is good in both countries and a negative link is found between fund size and fund performance. This study is contributive on literature on Islamic financing and is beneficial for the Muslim investors who don’t prefer conventional financial products due to religious reasons.