Performance Evaluation of Pakistani Mutual Funds: Empirical Evidence

Abstract

Mutual Fund is an organization that pools cash from a gathering of speculators to purchase monetary securities a less dangerous portfolio than an individual stockholder would do. This study was conducted by evaluating the performance of Pakistan mutual funds. The study used Portfolio approach and divided the sample firms into their nature of funds like money market, income, equity, index tracker, assets allocation, balanced, funds of fund, aggressive income, sharia compliant and closed ended funds. In this study Sharpe, Treynor, Sortino, Jensen Alpha and Information ratios were use as parameter for evaluation of performance of mutual funds. The 43 funds out of 93 are showing positive, while 50 funds showing negative Jensen alpha. Positive funds means that they are showing standardize performance, on the other hand negative funds means that their performances are under standard in the market. The higher beta showed that the majority of the funds are risk adjusted and having higher risk. While the beta of balanced funds and closed ended funds shown that these funds have face less risk, finally higher risk mean higher profit and less risk mean less return. The management of the Stock Exchange should try to enhance the information efficiency for investors, further they also try to make accurate decision so that the investor might face the higher risk with having higher return as well. The outcomes of this study will not be generalized on other markets of the world. This study will provide knowledge to the academician, management of stock exchange and the investors. It will helpful for management and investor in making right decision while investing in mutual funds.