Performance and Evaluation of Portfolio of Mutual Funds

Abstract

The basic approach of any kind of investor is to handle and minimize the risk and increase their profits. It is common fact that to manage the risk is not to have all eggs in a basket in monetary markets and this saying is familiar as diversification. The diversifications need decision regarding which basket to have which eggs and how much eggs should have in the basket. The lack of financial expertise in the context of mutual funds for making investment in markets has introduced mutual funds with the state of mind of financial experts. The experts of financial markets have only advantage since the fact that it is always win-win situation for them who don’t know about investment and decreasing the risk via managing funds in effective way by bigger portfolios and sufficient amount of money. As the mutual fund industry of Pakistan expanded with some pace in first decade of this century and due to this reason the performance evaluation of this industry become critical and hot topic.
 The study aims to measure the performance of Pakistani mutual fund industry from 2014 to 2017. There are total 233 mutual funds operating in the mutual industry of Pakistan, out of 233 mutual funds, total 45 mutual funds were selected for the study; 23 mutual funds were from equity while only 22 mutual funds were selected form money market. Sharpe ratio was used to measure the risk-adjusted performance of mutual funds and the Sharpe ratio in both equity funds and money market funds are positive, thus indicating that funds managers have the ability to diversify investment to decrease the risk.