Conventional Equity Funds Research Articles

Are SRI funds financing carbon emissions? An input-output life cycle assessment of investment funds

Indirect greenhouse gas (GHG) emissions (scope 3) generally represent more than half of the total life cycle impact attributable to a company or an investment. However, widely used sustainability assessment tools for investment funds fail to take these into account. Building on best practices from the industrial ecology field, we develop an input-output life cycle assessment (IOLCA) methodology to estimate life cycle GHG emissions of companies and investment funds. We apply our method to a sample of 1340 sustainable (SRI) and conventional equity funds domiciled in Europe and their 11,275 unique holdings. We extend our application to a case study of funds self-classified as Article 8 and Article 9 funds under the recent European Sustainable Finance Disclosure Regulation (SFDR, 2019). Our model estimates life cycle emissions for 94% of the companies held – compared to 17% coverage in the Carbon Disclosure Project (CDP). When including scope 3, the exposure to GHG emissions of both SRI and conventional funds is two to three times larger than when considering only direct impacts from holdings' operations. Finally, 24% of the sampled Europe-domiciled SRI funds are more exposed to life cycle carbon emissions than the ETF tracking the conventional market index MSCI Europe.

Ukuran, Usia dan Kinerja Reksa Dana Saham di Indonesia

This study aims to determine the effect of size and age on the performance of equity funds in Indonesia. The theory used in this research is the mutual fund theorem. The research was conducted on conventional and Sharia equity mutual funds registered with OJK for the 2015-2019 period. The data analysis technique used is multiple linear regression analysis. There were 59 equity funds that met the sampling criteria using a purposive sampling method consisting of 47 conventional equity funds and 12 Sharia-based equity funds. The results showed that the size and age of equity funds had no significant effect on their performance. The results of this study are consistent when using a sample of conventional and Islamic stock mutual funds.
 Keywords: Equity Mutual Funds; Size; Age; Performance; Mutual Fund Theorem

KOMPARASI REKSADANA SAHAM KONVENSIONAL DENGAN REKSADANA SAHAM SYARIAH

This study aims to determine whether there is a difference between the performance of Islamic mutual funds and conventional mutual funds in bullish and bearish market trends. The analytical method used is the mean difference test uses the independent sample t-test method, through the SPSS program by comparing the Jensen and Treynor indices. The samples of this study were 15 conventional mutual funds and 15 sharia mutual funds based on the highest achieved NAV. in each period 2017 as a bullish trend period and the 2020 period as a bearish trend period.
 Based on the Jensen index by Independent sample t-test in 2017 (bullish trend), there is a significant difference between the performance of conventional stock mutual funds and the performance of Islamic stock mutual funds and the performance of conventional stock mutual funds is better than Sharia, while in the 2020 (Bearish trend) there is no differene between performance of conventional equity mutual funds and performance of Islamic equity mutual funds. Based on the Treynor index by independent sample t-test in both bullish and bearish periods, there is no difference between the performance of conventional equity funds and the performance of Islamic equity funds

Analisis Perbandingan Kinerja Reksa Dana Saham Konvensional dengan Saham Syariah

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.

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

This paper analyses the risk-adjusted performance of Islamic and conventional equity funds during the COVID-19 pandemic. We show that Islamic equity funds demonstrated differentials in risk-adjusted performance, investment styles, and volatility timing compared to their conventional counterparts. Specifically, the results revealed that Islamic equity funds are more resilient to COVID-19 shock since they outperformed non-Islamic peers during the peak months of the pandemic. The trend continues even when the spread smoothens. These findings confirm the safe-haven properties of Islamic equity funds, which is helpful for investors aiming to hedge pandemic risks. The style analysis reveals investment drift from riskier styles to more prudent options in response to each stage's uncertainties. The results suggest policymakers should further investigate Islamic financial assets and their underlying principles to improve the resilience of economic systems in any future black swan events.

Responsible Investing and Stock Allocation

We analyze the portfolio choices of approximately 913,000 active participants in employee saving plans in France. Looking at the cross-section of equity exposure, we find that the inclusion of responsible equity options in the menu of available funds is associated with a 2.1% higher equity allocation by plan participants. Compared to an average equity asset allocation of 12.1%, it represents a material increase (17% in relative terms). Difference-in-differences analyses confirm that the introduction of a responsible equity option to a saving plan is followed by an increase of 7.2% in participants' appetite for stocks, contrary to what happens with conventional equity funds.

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

This paper analyses the risk-adjusted performance of Islamic and conventional equity funds during three stages of the COVID-19 pandemic. We show that Islamic equity funds demonstrated differentials in risk-adjusted performance, investment styles, and volatility timing compared to their conventional counterparts. Specifically, the results revealed that Islamic equity funds are more resilient to COVID-19 shock, since they outperformed non-Islamic counterparts during the peak months of the pandemic. These findings confirm the safe haven properties of Islamic equity funds, which is useful for investors aiming to hedge pandemic risks. The style analysis reveals investment drift from riskier styles to more prudent options in response to the uncertainties underlying each stage. The results suggest policy makers should further investigate Islamic financial assets and their underlying principles to improve the resilience of financial systems in any future black swan events.

The Performace Comparation in Indonesia: Conventional Mutual Funds vs Sharia Mutual Funds

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

The Investment Performance of Ethical Equity Funds in Malaysia

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.

Factors Affecting Fund Flows in Islamic and Conventional Mutual Funds of Pakistan

This paper aims to provide empirical evidence on the fund flows in conventional and Islamic equity and fixed-income funds by considering the relationship of it with management expense ratio, fund return, fund size, fund age, inflation, interest rate, and GDP in comparison for conventional and Islamic investors. By using panel data, the sample of Pakistan’s locally managed equity and fixed-income funds are considered comprised of 21 individual conventional and Islamic funds from equity and fixed income category respectively from 2009 to 2018. The results provide evidence that Islamic investors have different factors when choosing funds in comparison with conventional investors. The study finds that the key factor influencing the fund flows is the management expense ratio, return, and fund size. This study also shows that all the conventional and Islamic fund characteristics of equity and fixed-income funds are positively related to fund flows except management expense ratio and fund age, which have negative relationship with fund flows. The empirical findings of this paper clearly call for fund managers and investors to review their investment policy as this paper help fund managers to maintain a balanced amongst the factors so as to ensure maximization of its return, benefiting both; Mutual Fund managers and investors. The results could also provide better information and guidance for investors as well as policy-makers on the factors that affect the fund flow for Pakistan Islamic and conventional equity and fixed-income funds.

Comparative analysis of Shari’ah-compliant portfolios: evidence from Pakistan

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.

ANALISIS PERBANDINGAN KINERJA REKSA DANA SAHAM KONVENSIONAL PENDEKATAN METODE SHARPE DAN TREYNOR MEASUREMENT

The aim of the study is to know the difference between the measurement of the performance of Conventional equity funds using Sharpe and Treynor Methods. The population of the study was a conventional equity funds listed in the Financial Services Authority for the year 2013-2016. The number of samples in this study were 32 conventional stock mutual funds by using purposive sampling. This study also used data Composite Stock Price Index (CSPI), the net asset value of connventional equity funds and the interest rate of Bank Indonesia Certificates (SBI) were taken on a monthly basis. This analysis technique using the Mann-Whitney test. The results showed a conventional equity fund performance as measured by the method Sharpe dan Treynor method showed better results than the market performance (JCI) and there is a difference between performance measurement using a conventional equity fund Sharpe and Treynor.

Comparing the determinants of fund flows in domestically managed 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.

A comparative analysis of the smart money effect in Malaysian Islamic and conventional equity funds

ABSTRACTThis paper undertakes a comparative analysis of the ‘smart money’ effect—whereby investors are able to identify funds that subsequently perform well—among Malaysian Islamic and conventional domestic equity funds. We find that Islamic equity fund investors are unable to identify funds that will outperform benchmarks in the future. However, these same investors have some ability in identifying poorly performing funds. The key implications are as follows. First, Islamic equity investors naively chasing recently highly performing funds only incidentally benefit from mutual fund momentum strategies. Second, fund managers may be able to benefit from a contrary ‘dumb money’ effect found among Islamic equity fund investors in that they appear most concerned with only very poor performance in determining the flow of funds. Finally, we find high search costs may be one reason why investors naively chase past better performing funds.

Comparison between Islamic and General Equity Funds of Pakistan: Difference in Their Performances and Fund Flow Volatility

This study aims to analyze the performance, assets volatility and fund flow performance relationship of Islamic and conventional equity funds. Islamic funds are different from conventional funds as they do not invest in those businesses whose operations or capital structure is against the Shariah (law) of Islam. We do not find any significant difference between the performances of Islamic and conventional funds and they both are unable to beat the market. Conventional funds witnessed more volatility in their asset size than Islamic funds. Islamic funds are more sensitive to lagged positive returns and less sensitive to lagged negative returns as compared to conventional funds. These results indicate that Islamic investors derive multi attribute function instead of just profit and risk optimization.

Comparative performance-related fund flows for Malaysian Islamic and conventional equity funds

Purpose – The purpose of this paper is to compare the fund flow – performance relationship for Islamic and conventional equity funds in Malaysia. Design/methodology/approach – The authors use panel regression models to estimate the relationship between fund flows and performance for Islamic and conventional equity funds in Malaysia from 2001 to 2009. The data for each fund include fund flows, assets under management, management expenses, fund age, portfolio turnover, fund risk and return and the number of funds in the fund’s family. The authors also include market returns and year effects. The sample consists of 127 Malaysian equity funds with at least 65 per cent domestic equity holdings comprising 35 Islamic and 92 conventional equity funds. Findings – Islamic fund investors respond to performance in much the same way as conventional fund investors, increasing fund flows to better performing funds and decreasing fund flows to poorer performing funds. However, there is also evidence that Islamic fund investors are relatively less responsive toward poorly performing Islamic funds, suggesting an asymmetry in the expected positive fund flow – performance relationship, but only for Islamic fund investors. When choosing funds based on other fund attributes, Islamic fund investors again exhibit similar behaviour, and like conventional fund investors direct larger percentage fund flows into smaller funds as well as funds with larger past fund flows and higher expense ratios. Research limitations/implications – The authors were only able to access data on annual net fund flows not quarterly or monthly fund inflows and outflows as usual in developed markets and this may obscure some important aspects of investor decision-making. There is also insufficient data for matched-sample techniques, which may better control for fund-specific characteristics. Practical implications – Islamic funds like conventional funds will experience increased fund flows with better performance and vice versa. However, Islamic fund investors appear somewhat less likely to remove monies from poorly performing funds. The authors believe this is because investors either place a premium on the non-return attributes of Shariah-compliant funds and/or wish to avoid search costs in finding another suitable Islamic fund. Apart from this, Islamic and conventional fund investors behave in a similar manner, and the authors believe that this is possible in Malaysia given the size and diversity of its Islamic fund sector. Originality/value – This paper is one of the very few empirical studies concerning the behaviour of Islamic investors, particularly in Malaysia, primarily because of limitations in data availability.

Smart Money in Malaysian Islamic and Conventional Equity Funds

This paper undertakes a comparative analysis of the smart money effect in mutual funds - whereby investors are able to identify funds that subsequently perform well - in Malaysian Islamic and conventional domestic equity funds. We find that Islamic equity fund investors are unable to identify funds that will outperform benchmarks in the future. However, these same investors have some ability to identify poorly performing funds and relocate their funds accordingly. This contradicts our findings regarding their conventional counterparts, such that conventional equity fund investors are generally able to identify better performing funds and modify their investments in light of this information. The main key implications are as follows. First, Islamic equity investors naively chasing recently highly performing funds only incidentally benefit from mutual fund momentum strategies. Second, fund managers may be able to take advantage of a ‘dumb money’ effect found among Islamic equity fund investors in that they appear most concerned with only very poor performance in determining the flow of funds, not so much a lack of superior performance. Finally, high search costs may be one reason why investors naively chase past better performing funds.

A Fund Flow Study of Investor Migration between Islamic and Conventional Managed Funds in Malaysia

The Malaysian managed fund market provides investors with greater choice between conventional and Islamic equity funds. Widening choice also pose challenges to investors in relation to selection of fund type, manager and portfolio optimization. While aggregate market information reveals the extent of investment in funds, not much is known on investors’ migration between fund types in this dual market. Using net fund flow analyses, this paper addresses this paucity through a comparative study of the movement of investable funds between fund types and managers. Net fund flow studies at individual fund and fund manager level provides a method of overcoming analytical deficiency designed to determine trends in investor’s choice. A sample of large and small Islamic and conventional funds and managers in a new Malaysian economic period is used for the purpose. The methodology compares net fund flows (subscriptions less redemptions) between different classes of funds, expressed through net increase/reduction in cash flow using yearly time intervals. This method follows similar methods in other studies since fund managers are generally loath to provide quantitative data on movements in fund membership for reasons associated with proprietary and management performance. Using reported financial statements and market data, fund flows are determined to evaluate the effect of fund type and size based on market concentration. The analysis is used to determine the extent to which investors’ exercise preference between Islamic and conventional funds. For the selected period, lagged fund flows indicate large net outflows from conventional funds compared to Islamic funds, while net outflows from Islamic funds are insignificant. The mean inflows to Islamic funds are weak for one year but significant for the two years during which negative flows were recorded against conventional funds. Market concentration ratios indicate that three large Malaysian fund managers collectively manage 57% of total funds invested in the retail equity fund market. They also manage 71% of all Islamic equity funds. The concentration ratios also show that two-thirds (68%) of all funds are controlled by five large fund managers. The remaining twenty small market managers account for a mere 13% of the market.

Risk and return characteristics of Islamic equity funds

Islamic equity funds (IEFs) differ fundamentally from conventional equity funds since Muslims are prohibited to invest in certain companies/sectors and pay or receive interest. This paper analyzes the risk and return characteristics of a sample of 145 IEFs over the period 2000 to 2009. Our results show that IEFs are underperformers compared to Islamic as well as to conventional equity benchmarks. This underperformance seems to have increased during the recent financial crisis. We also find that IEF managers are bad market timers. They try to time the market, but in doing so, reduce the return rather than increasing it. An important implication of our results is that Muslim investors might improve their performance by investing in index tracking funds or ETFs rather than to invest in individual IEFs.

Environmental Impacts of Conventional and Sustainable Investment Funds Compared Using Input‐Output Life‐Cycle Assessment

This study compares equity funds that are managed according to sustainability goals with conventionally managed funds with respect to their environmental impacts. Overlap in the portfolios of sustainable equity funds and conventional equity funds can be very large. Further, the sector allocation of both types of funds is generally very similar, because portfolio managers follow a chosen benchmark to minimize risk. These two effects may result in no difference existing between the two types of funds in terms of their environmental impact and damage (null hypothesis of this research). This study comparatively assesses the environmental impact of portfolios of 26 investment funds: 13 sustainable investment funds and 13 conventional funds, which are managed according to the benchmark MSCI World. The study applies input–output life‐cycle assessment (IO‐LCA) in combination with a simulation of company‐specific environmental performance. The environmental impact is evaluated per functional unit for each fund, measured as the risk‐adjusted financial performance. The statistical analysis showed that the analyzed sustainable investment funds performed better with respect to environmental impact assessment but worse in economic risk‐adjusted performance (RAP) over the period 2000‐2004. In 2004, however, the RAP of the selected sustainable investment funds showed better performance. Both samples considerably overlap for the environmental and economic parameters. The results suggest that the environmental impact of sustainable investment funds in the sample is slightly less than that of conventional funds.