Comparative Analysis of Private and Public Mutual Funds: A Performance Evaluation

Abstract

Abstract: The mutual fund industry is a popular investment avenue that offers investors the opportunity to invest in a diversified portfolio of securities. The industry has witnessed significant growth in recent years, with investors seeking to maximize their returns and reduce risk. This paper presents a comprehensive comparative analysis of private and public mutual funds in terms of their performance. The study aims to evaluate the risk-adjusted returns, expense ratios, fund size, asset allocation, and other relevant factors of both private and public mutual funds to determine which type of fund offers better performance. To conduct the analysis, a sample of four private and four public mutual funds was randomly selected, and their performance was evaluated using various performance metrics such as Sharpe ratio, Treynor ratio, and Jensen's alpha. The data was analyzed using statistical tools such as U test, t-test, and regression analysis. The study found that private sector mutual funds performed comparatively better than public sector mutual funds in terms of risk-adjusted returns, expense ratios, and asset allocation. Private sector mutual funds had higher Sharpe ratios and Treynor ratios compared to public sector mutual funds, indicating that they generated higher returns per unit of risk taken. Private sector mutual funds also had lower expense ratios, indicating that they charged lower fees to investors. In terms of asset allocation, private sector mutual funds had a higher allocation towards equity securities compared to public sector mutual funds, which had a higher allocation towards debt securities. The study also identified significant differences in the investment strategies, portfolio management, and investor base of private and public mutual funds. Private sector mutual funds had a more aggressive investment strategy, with a higher allocation towards equity securities, whereas public sector mutual funds had a more conservative investment strategy, with a higher allocation towards debt securities. Private sector mutual funds were also found to be more actively managed compared to public sector mutual funds. Private sector mutual funds had a higher percentage of assets under management from retail investors, while public sector mutual funds had a higher percentage of assets under management from institutional investors. The study provides valuable insights to investors, fund managers, and policymakers regarding the performance of private and public mutual funds. The findings suggest that investors may benefit from investing in private sector mutual funds due to their higher risk-adjusted returns, lower expense ratios, and higher allocation towards equity securities. Fund managers may also benefit from the study by gaining insights into the investment strategies and portfolio management practices of private and public mutual funds. Policymakers may use the study to design policies that promote the growth and development of the mutual fund industry. Overall, this study contributes to the existing literature on mutual funds by providing a comprehensive comparative analysis of private and public mutual funds in terms of their performance. The study adds to our understanding of the factors that affect the performance of mutual funds and provides insights into the investment strategies and portfolio management practices of private and public mutual funds.