Performance evaluation of open end and close end mutual funds in Pakistan

Abstract

The study is about evaluating the performance of close and open end mutual funds in Pakistan. It provides guidance to the investors on how risk-adjusted-performance evaluation of mutual funds can be done and how they can use performance analysis at the time of investment decision making. Different researches had been conducted on mutual fund industry of Pakistan to evaluate the performance but the focus of majority of researches was on close end funds. This research considered both close and open end funds. The risk adjusted performance of both types of mutual funds has been measured through traditional measures such as Sharpe measure, Sortino measure, Treynor measure, Jensen differential measure and information measure. Secondary data has been used for performance evaluation. The results through Sharpe measure and Sortino measure are negative of sample data. It shows risk adjusted negative return to investors. Treynor measure results of few funds are better; however, overall result of Treynor measure is also negative. The Jensen differential measure and information measure results have documented negative performance, whereas, market portfolio result of all measures is positive which shows positive return per unit of risk. The results of all measures indicate that mutual fund industry is below as compared to market portfolio performance. Risk adjusted performance results of mutual funds depict negative risk adjusted returns to investors. The probable reason for negative risk adjusted returns of mutual fund industry can be setback by global financial crisis to the market during sample period. Key words: Portfolio, mutual funds, risk adjusted performance, open and close end funds.