An insight of the mutual funds sector of Pakistan: Performance determinants

Abstract

Financial Instruments have become a vital part of the financial markets and institutions of the present world. Mutual funds is one of the financial instruments that has emerged in recent times and has demonstrated exceptional acceptance and growth among investors throughout the world. So in this study the researchers examine the factors that are effecting the mutual funds’ performance. This study examines the factors namely fund size, fund turnover and management charges with the performance of both conventional and Islamic mutual funds operating in Pakistan. For this purpose a sample of 40 mutual funds has been taken from equity and income funds out of which 20 funds are Islamic mutual funds and 20 are conventional mutual funds. Data has been collected on quarterly basis for last five years (2013-17). The research analysis tools applied in this research are Redundant test, Hausman Test and Fixed effects model. It was found through the analysis that fund size, fund turnover and management charges are positively related to Islamic mutual funds’ performance. In addition to that it was also noticed that as far as conventional mutual funds are concerned fund size and fund turnover are positively related to fund performance whereas management chares exhibits negative relation to Islamic mutual funds’ performance.