An Empirical Investigation of the Performance of Fund Managers in Pakistan

Abstract

This study aims to determine the stock selection ability and market timing ability of mutual fund managers, focusing on conventional funds and Islamic funds in Pakistan. Although there has been significant growth in the number and assets of mutual funds in recent years, few studies measure the performance of mutual funds managers. The scarcity of existing literature motivates this study. In this study, two models are used to measure the stock selection and market timing on a sample of conventional mutual funds and Islamic mutual funds over 2010 and 2019 using annual returns. Overall, the results indicate that the performance study of conventional mutual funds and Islamic mutual funds indicates that manager performance is not superior in all three portfolios, i.e., conventional funds, Islamic funds, and overall funds in over sample period. This also indicates that both Conventional and Islamic fund managers do not outperform the market (KSE 100 index). Thus, there is a lack of market timing ability. Using Tranoy and mazuy and Jansen models found a lack of stock selection and market timing ability of mutual fund managers in Pakistani mutual funds. In this study, I have applied only two models to examine both the timing and selection ability of conventional and Islamic Pakistani equity funds. For future possibilities, the study suggests adopting several methods and approaches like the TMFF3 model and HM-FF3 model, making the study more comprehensive and accurate than this research.

Empirical comparison of Shariah-compliant vs conventional mutual fund performance

“…, 2013; Cornell et al. , 2020; Namvar and Phillips, 2013; Sanaullah et al. , 2021; Wattanatorn and Padungsaksawasdi, 2020).…”

“…A few studies focus on emerging markets including Indonesia, Malaysia, Pakistan and the KSA to investigate the performance of equity MFs. Sanaullah et al. (2021) found that neither conventional nor Islamic fund managers outperform the Karachi Stock Exchange 100 Index (KSE 100).…”

“…Parida and Teo (2018) concentrated on investigating the impact of portfolio disclosure frequency on fund performance, and Galagedera (2019) A few studies focus on emerging markets including Indonesia, Malaysia, Pakistan and the KSA to investigate the performance of equity MFs. Sanaullah et al (2021) found that neither conventional nor Islamic fund managers outperform the Karachi Stock Exchange 100 Index (KSE 100). In a comparison of the Shariah and conventional portfolios listed on the Indonesia Stock Exchange (IDX) in terms of performance and volatility, Arifin and Qizam (2021) found no difference with the exception that Shariah portfolios carry a lower risk.…”

“…They observed that including the Active Peer Benchmark in the model greatly improved the selection process, as the funds selected outperformed their benchmarks. Further, the literature includes several empirical studies focused on the multifactor model with alpha estimate to offer a comparison between how well mutual funds as opposed to diversified benchmark portfolios perform (Agnesens, 2013;Chen et al, 2013;Cornell et al, 2020;Namvar and Phillips, 2013;Sanaullah et al, 2021;Wattanatorn and Padungsaksawasdi, 2020). The literature also offers some studies on the performance of European MFs, including work by Vidal-Garc ıa (2013), who found negative alpha values for Germany, Italy, Spain, France, the UK and the Netherlands.…”

Mapping The Field of Islamic Mutual Finance in Indonesia

“…This supervision will be adjusted to the market mechanisms and other factors in accordance with economic conditions. Calculation advantages for conventional mutual funds that are run using the distribution method profit between investors and investment managers which is calculated based on the development of interest rates (Sanaullah et al, 2021).…”