The Risk Adjusted Performance of Pakistani Islamic Mutual Funds

Risk Adjusted Performance of Pakistani Islamic Mutual Funds

Abstract

The mutual funds are the most important pillar of financial sector which can be used to attract new investors to the market. The existing work has been conducted to evaluate the risk adjusted performance of Mutual Funds. The study has been carried out in the Islamic Mutual Funds sector of Pakistan. There are 18 total Islamic funds working in Pakistani market and due to the lower number, the study has included whole Islamic mutual funds in the sample of the study. The study has collected historical NAVs from 2011 to July 2020. The study has used beta for the measurement of risk but also the standard deviation for the estimation of systematic risk. The paper has included Sharpe ratio, Tryenor Ratio and Jensen Alpha for the performance evaluation of Pakistani Islamic Mutual Funds. The findings shows that the majority of the funds shows positive Sharpe Ratio which shows the satisfactory performance while the value of Jensen shows that the maximum number of funds are having positive Jensen Alpha. The results of beta shows that the larger number of funds are having lower and average risk and having positive return which means that the risk adjusted performance of the Islamic Mutual funds are satisfactory. The study has recommends that government should support mutual fund sector which can increase the trust of investors. The study has contributed about the specifically risk adjusted performance of Islamic Mutual funds performance in Pakistani market.