Mutual fund flows and performance in Saudi Arabia: analysis of how new factors impact fund flow and performance

Abstract

This thesis explores the equity mutual fund industry in Saudi Arabia by investigating the impacts of several variables on fund performance and money flow. The study includes all equity funds that operate in the Saudi Arabian market from the beginning of 2006 until July of 2017, which is the longest period of study has been examined the Saudi mutual fund industry. An extensive list of variables is applied in the empirical work to explore the performance and flow motives. We first investigate the impact of the oil market volatility and other fund investment characteristics on the mutual fund performance. The relationship between return performance and the oil volatility is extended to be examined based on funds investment geographic location focus and funds Shariah compliance. In addition, fund managers skills are investigated to find whether they can gain abnormal returns based on the oil market conditions. Second, we examine the main motives of mutual funds flow in the Saudi Arabian market which helps to understand the behaviour of funds investors. Different factors are applied to provide a conclusion of the determinates of the money flow sensitivity in Saudi Arabian mutual fund market. The oil market volatility is one important variable that is included in this study to examine the investors reactions to the oil market condition. Finally, we investigate whether the distribution channels play a significant role in influencing the performance and money flow of the mutual fund industry. There are only two channels that provide funds shares in the Saudi Arabian market: (bank-managed funds and financial institution-managed funds).