The resilience of Islamic equity funds during COVID-19: Evidence from risk adjusted performance, investment styles and volatility timing

The Resilience of Islamic Equity Funds during COVID-19: Evidence from Risk Adjusted Performance, Investment Styles and Volatility Timing

PurposeThis study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods.Design/methodology/approachThe authors comparatively analyze the performance of mutual funds using measures, such as tracking error, Sharpe ratio (1966), Treynor ratio (1965), M-square measure by Modigliani and Modigliani (1997) and information ratio. The authors also use market timing and selection measures, such as Treynor and Mazuy model (1966), Henriksson and Merton (1981) model and Fama’s decomposition approach (1973).FindingsThe authors find that Islamic equity funds are as much competitive as conventional equity funds. All Islamic equity funds have positive Sharpe ratio, Treynor ratio and net selectivity measure. Islamic equity funds are slightly less risky in general. Islamic equity and income funds generally have positive Jensen's Alpha and a positive market timing ability. However, the authors find that Islamic income funds generally underperform the market due to less Shari’ah-compliant investment class assets in the market.Practical implicationsIt will help the industry players to assess their strategic positioning with regard to the commercial competitiveness of Islamic investments.Originality/valueThe authors take considerably large sample of 60 funds in Pakistan as compared to previous studies and also cover recent period (2006-16). For income funds, the authors construct an original benchmark index based on price and dividend data and use that in performance assessment.

One of the issues that have an impact on the growth of Islamic Equity Funds is financial risk tolerance. While it is a fundamental issue that is directly related to Islamic Equity Fund’s manager performance. If investment managers perform better to cultivate Islamic Equity Funds, then the intention in investing within Islamic Equity Funds will be increased. This research aims to determine and provide information about Islamic Equity Funds' performance in Indonesia. It used quantitative statistical analysis to investigate the influence of stock selection skills, market timing ability, fund size, fund age, expense ratio, and portfolio turnover towards the Islamic Equity Funds performance. This study used annual data over the periods 2015-2020 which was obtained from the prospectus of each Islamic Equity Fund, Central Bank Indonesia (BI), and Statistics Indonesia (BPS). The result indicates that stock selection skill and expense ratio have a positive significant impact on the performance of Islamic Equity Funds, while market timing ability, fund age, and fund size have not a significant impact but the result revealed positive values. Otherwise, the portfolio turnover has a negative significant impact on Islamic Equity Funds' performance. Hence, it can be inferred that the higher investment managers ability to select its portfolio stock, the better return will be obtained and it can be inferred that the expense ratio of an equity fund reflects how much it pays for portfolio management, administration, marketing, and distribution, among other things. Originality/Value: This paper focuses on the issue that occur in Islamic equity funds which are very essential as an investment portfolio, and only a few papers have conducted research in this area. Therefore, knowing the key factors that influence the performance of Islamic equity funds can optimize their function and attract investors.

Smart Money in Malaysian Islamic and Conventional Equity Funds

PurposeThis paper aims to provide an empirical evidence on the fund flows-past return performance relationship by also considering the management expense ratio, the portfolio turnover, the fund size and the fund age of Islamic equity funds (IEF) investors in comparison with conventional equity funds (CEF) investors.Design/methodology/approachBy using panel data, the sample of Malaysian domestic managed equity funds is considered which comprises 20 individual funds from IEF and CEF from 2011 to 2013.FindingsThe results provide evidence that IEF investors have different factors when choosing funds in comparison with CEF investors. The study finds that the key factor influencing the fund flows of IEF is the management expense ratio, compared to the CEF which is fund size. This study also shows that all the fund characteristics of IEF and CEF are positively or negatively related to the fund flows.Research limitations/implicationsThe present study may be extended by considering other fund categories such as the money market fund, the balanced fund, the bond fund and the fixed income fund.Practical implicationsThe empirical findings of this paper clearly call for fund managers and investors to review their investment policy. The results could also provide better information and guidance for investors as well policy makers on the factors that affect the fund flow for Malaysian Islamic funds and CEF.Originality/valueThis paper is among the earliest empirical evidence studies on the fund flows-past return performance relationship by focusing in a comparative manner on IEF investors and CEF investors in Malaysia.

<p><em>This study aims to analyze determinant performance of Islamic equity funds and compare the performance of Indonesian Islamic equity funds with Malaysian Islamic equity funds period 2017-2019. Factors that are thought to affect the performance of mutual funds are past performance and inflation. Mutual fund performance itself is measured using the Sharpe Index. This study uses secondary data and the sample is taken using purposive sampling. Methods of data analysis using Panel Data Regression. This study indicates that simultaneously the variables Past Performance and Inflation affect the performance of Islamic equity mutual funds in Indonesia and Malaysia.</em></p><em>Furthermore, it partially shows that Past Performance harms the performance of Islamic equity funds, while inflation positively affects the performance of Islamic equity funds. In addition, this study also shows that there is a significant difference between the performance of Indonesian and Malaysian Islamic equity funds. Malaysian Islamic equity funds were superior to Indonesian Islamic equity funds in 2017-2019.</em>

This paper investigates the investment performance of Malaysian Islamic equity funds and a matching sample of conventional equity funds relative to their market benchmark. An integrated model is used to simultaneously capture the market timing and selectivity skills of fund managers. Our findings indicate that the Islamic funds do not match the performance of the conventional funds in terms of selectivity skill. However, Islamic funds perform no worse than their conventional counterparts in market timing, although neither outperform the market. These findings have crucial implications not only for fund managers’ investment decisions, but also for sensitive shariah-compliant investors and risk-seeking investors of Islamic equity funds in their investment portfolio preference.

Risk and return characteristics of Islamic equity funds

International evidence on Islamic equity fund characteristics and performance persistence

This study aims to see, whether or not there is a reference to the performance of conventional and Islamic mutual funds in Indonesia with the Sharpe Index, Treynor Index and Jensen Index. The population of this research is Conventional Equity Mutual Funds and Sharia Equity Mutual Funds which are listed on the Indonesia Stock Exchange. Sampling was carried out using proposive judgment sampling method, namely the selected sample was invincible with predetermined selection criteria. The sample chosen is the monthly NAB of Islamic and conventional equity funds that were effective before January 1, 2016 and actively working until December 31, 2018, this is intended to obtain the latest information on the performance of equity mutual funds. Based on the sample selection criteria, it is obtained 20 mutual funds for conventional category stocks and 13 mutual funds for Islamic stocks that are active and publish their monthly NAB during the study period. This hypothesis testing is done in a comparative way, namely data analysis is done by using the Independent Sample T-Test. This analysis is carried out by comparing the returns, risks, and performance of conventional and Islamic mutual funds. Based on the results of the Independent Sample Test, it shows that there is a significant difference between the performance of Islamic equity funds and conventional equity funds using the Sharpe Index, Treynor Index and the Jensen Index

This study aims to explain the comparative analysis between the performance of conventional equity funds and sharia equity funds using the sharpe, treynor, and jensen methods. The population in this study were all registered conventional equity funds and sharia equity funds on the Otoritas Jasa Keuangan (OJK) in 2017 – 2020. Based on the purposive sampling technique, 21 samples of equity funds were obtained as the samples of this study. The analysis technique in this study is comparative hypothesis testing (differential test). The results of this study indicate that there is no significant difference between the performance of conventional equity funds and sharia equity funds throught the sharpe, treynor, and jensen methods.

Investment Styles and Performance of Mutual Funds in India

The contribution of market movements, asset allocation and active management to Islamic equity funds’ performance

This paper aims to examine the comparative performance of equity and balanced unit trust funds before and during the COVID-19 pandemic, which is from January 2014 to December 2018 and January 2019 to December 2020. To achieve the aforementioned study objective, the study conducted by using three model measures, Sharpe, Treynor and Jensen’s alpha Index. The findings of this study carry out the COVID-19 pandemic does not affect the performance of equity and balanced unit trust funds. Investors gain a return from equity funds and balanced funds into a well-diversified domestic investment portfolio. To be concluded that unit trust funds help investors to put their money in different baskets of investment avenues to minimize the risk of loss of money, especially during a turbulent market. Future studies may investigate the features of fixed-income-based unit trusts, such as government and corporate bonds with commercial and social goals and as a mechanism for promoting environmental, social and governance (ESG) considerations towards establishing a low-carbon economy.

Comparative Fund Flows for Malaysian Islamic and Conventional Domestic Managed Equity Funds