Islamic Equity Funds Research Articles

Persistence of multidimensional time‐varying skills of fund managers: A comparison of conventional and Islamic equity funds

AbstractThis comparative study investigates the time‐varying skills of Shariah‐Compliant and conventional equity fund managers in selectivity, volatility, market return, liquidity, and higher‐order of Multidimensional Time‐Varying Skills of Fund Managers: A Comparison of Conventional and Islamic Equity Fundsco‐moments. Additionally, it examines the persistence and causal relationships among these timing abilities. The analysis utilizes equity mutual funds data from January 2010 to June 2022, encompassing three major Islamic countries: Saudi Arabia, Malaysia, and Pakistan, representing over 80% of the Islamic funds market. Employing diverse time‐varying techniques, this study reveals the presence of selectivity, volatility, and co‐skewness timing skills while detecting the absence of a market, liquidity, and co‐kurtosis timing abilities among conventional and Islamic fund managers.

Investment styles of islamic equity funds

We investigate the dynamics of investment styles of Islamic equity funds (IEFs), mainly through portfolio holdings. We rely on an unbiased survivorship sample of 224 active portfolios domiciled in 22 countries from 2004 to 2018 to shed new light on style concentration. IEFs are overwhelmingly skewed initially to value stocks in Islamic countries and growth stocks in non-Islamic countries. We find a subsequent shift from these styles to a more blended approach. Investments in Islamic countries shift from mid-cap to large-cap stocks, while those in non-Islamic countries remain in extremely large-cap stocks. The propensity of style shift is larger in asset type than in asset size. The style drift analyses show that most IEFs drift in style, with a more aggressive drift in Islamic countries than in their non-Islamic counterparts. They are more likely to alter their portfolio exposure in the sight of adverse outcomes. Implications of our results for faith-based investors and regulators are identified in the study.

Determinant Performance of Islamic Equity Funds in Indonesia

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.

Do actively managed equity funds add value in developing economies? – The case of ‘inverse Gruber puzzle’ in Pakistan

PurposeThis paper evaluates the performance of actively managed conventional and Islamic equity funds in a developing economy with a focus to assess the performance-growth puzzle posited by Gruber (1993) (a.k.a Gruber’s puzzle). Under the context of an emerging market of Pakistan, this study explores if actively managed equity fund (AMEF) managers have been able to add value by outperforming the market in terms of stock-selection and market-timing abilities; and the comparative performance analysis of Islamic versus conventional AMEFs is also carried out.Design/methodology/approachWe employ Sharpe and Treynor ratios, Capital asset pricing model, Fama–French three factors model (1993), Carhart four-factor model (1997) and Hendrickson (1981) market timing models on 45 equity funds comprising of 23 conventional and 22 Islamic equity funds operating in Pakistan for a period of 10 years. The overall sample period (2008–2018) is divided into two 5 years sub-periods (i.e. 2009–2013 and 2014–2018) and three 3 years sub-periods (2009–2011, 2012–2014 and 2015–2017) to be viewed in conjunction with the country's macro-economic condition.FindingsWe report that the actively managed equity funds (AMEFs) were unable to beat the market index with their stock selection or market timing capabilities. However, AMEFs depicted improved performance in the post-global financial crisis period where both conventional and Islamic AMEFs generated substantial rewards for the given amount of risk. Also, conventional AMEFs outperformed Islamic AMEFs potentially due to their holdings in highly leveraged value and large-cap stocks, while Islamic AMEFS invest more cautiously in small-cap and value firms. Analysis of market timing skills revealed that the funds have not been able to select the undervalued stocks and adopted a defensive strategy in the post-global financial crisis recovery period.Practical implicationsOur findings shed some interesting insights and raise some pertinent questions for research, policy, and practice – specifically for developing countries’ context. The no ‘return-growth’ configuration defies its fit with the ‘Gruber puzzle’ and somewhat presents a case of what we call the ‘Inverse Grubber puzzle’. This novel notion of the ‘Inverse Grubber puzzle’ should inform policy and practice to reflect on their practices, institutional arrangement, regulatory framework and policy design in developing economies characterized by lacklustre performance and growth of AMEFs. For example, the regulatory design may consider focusing on stimulating financial inclusion and deepening by motivating low-cost Index tracker funds (ITFs) – with lower fund management costs, while allocating the avoided cost to flow towards effective marketing campaigns driving greater awareness, financial deepening, and investor base diversification. For future research, financial development researchers may explore the implications and appropriateness of AMEFs versus ITFs in other developing economies.Originality/valueThe work reported in this paper is original and constitutes a valuable asset for ethno-religious-sensitive investors. The research has not been published in any capacity and is not under consideration for publication elsewhere.

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

Performance of Islamic Equity Fund in Indonesia and Malaysia

This study aims to measure the performance of Indonesian and Malaysian Islamic stock mutual funds and find out who performs better based on the Sharpe Index, Jensen Alpha, Escess Return of VAR (EROV) methods. ) and Sortino Ratio, and which sharia shama mutual funds performed better among them during the period 2010 to 2019. This study concludes that on average, both Indonesian and Malaysian Islamic equity mutual funds perform no better than market returns. However, the results of this research analysis have not made it possible to conclude that Indonesian Islamic stock mutual funds outperform Malaysian Islamic stock mutual funds or vice versa. This is because (1) both of them underperformed the market benchmark, (2) the results of the t-test show that based on the two measurement methods (Sharpe Index and EROV) there are significant differences, but based on the other two methods (Jensen Alpha and Sortino ratio) the t-test results -Test is not convincing enough to say that the average value of Jensen Alpha and IMF Sortino Ratio in Malaysia and Indonesia is significantly different. And (3) statistically, the samples of Indonesian and Malaysian Islamic stock mutual funds are not balanced.

DO INVESTORS OF ISLAMIC EQUITY FUNDS FOLLOW WARREN BUFFET’S ADVICE? A REGRESSION ASSESSMENT

Researchers have doubted Islamic funds’ ability to provide promising financial returns due to the shariah screening procedures. Despite its popularity, Islamic funds are still in doubt to generate attractive returns. Survival of Islamic funds is highly contingent on their capacity to foresee Shariah compliance opportunities in economic shifts. Investors defer fund withdrawal of the worst-performing funds and anticipate the manager will adjust the fund's investing strategy for a future with higher yields. Thus, this paper aims to investigate investors’ reactions to the Islamic equity fund results (IEs) according to the opportunity motive of Warren Buffet. This is accomplished by evaluating the relationship between fund flow and performance. This allows us to determine whether investors behave toward the greatest and worst-performing funds by transferring cash into or out of the funds. This study uses panel data analysis to investigate 134 IEs from 2007 through 2019. The findings revealed that the link between fund flow and performance of IEs is incompatible with the asymmetric relationship, implying that the cash outflow for poorly performing funds declined. In contrast, cash inflow fell for funds that performed the best. Consistent with Warren Buffet’s advice. Keywords: Islamic equity funds; fund flow; fund performance; Warren Buffet

Performance of islamic equity and fixed-income funds during the covid-19 pandemic in Malaysia

Performance of islamic equity and fixed-income funds during the covid-19 pandemic in Malaysia

Islamic equity funds and stock market: dynamic relation and market timing during the COVID-19 outbreak

PurposeThis paper aims to explore the impact of the COVID-19 pandemic on the market timing skills of Islamic equity funds in Asia, Europe and North America.Design/methodology/approachThe authors employed a two-step process. First, a Granger causality test is applied to test the bivariate relationship between Islamic fund indices and stock market ones by highlighting the impact of the COVID-19 pandemic. Second, the methodology of Treynor and Mazuy (1966) is deployed to account for the market timing abilities skills of Islamic fund managers during the pandemic period.FindingsThe investigation revealed mixed results. The European Islamic funds were positively impacted by the stock market as well as by the COVID-19 pandemic context. Additionally, compared to their Asian and North American peers, only European Islamic fund managers have the ability to time the market during the health crisis period.Research limitations/implicationsDespite its contribution to the Islamic finance literature, this study has some flaws. Indeed, the selected sample of three regions, namely Asia, Europe and North America, precludes extrapolating these conclusions. Other regions should be investigated to further our understanding of Islamic equity funds. Furthermore, due to data availability and accessibility, the study period was limited to a specific time of the COVID-19 pandemic. This shortcoming can be addressed through a multiwave investigation, especially since each region was exposed differently to the pandemic.Practical implicationsThe paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic fund managers across the three regions would serve as a guide to identifying the most suitable internationally focused investment strategy.Social implicationsThe paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic funds managers across the three regions would serve as a guide to identify the most suitable internationally focused investment strategy.Originality/valueThe originality of this investigation is that it is the first to examine Islamic equity fund managers and their skills to time the stock markets during the COVID-19 pandemic period in Asia, Europe and North America. The current paper extends the Islamic finance literature.

Determinants of Islamic Equity Funds Performance: Case Study of Indonesia

The performance of Islamic mutual funds is significant either for investors or policy-makers. Many factors affect the performance of Islamic mutual funds, such as internal factors, external factors (macroeconomics), and market index. This study aims to analyze the impact of the past return of Islamic mutual fund, BI rate, and the Jakarta Islamic Index (JII) on the performance of Islamic equity mutual funds. By employing panel data regression analysis, this study documented some interesting findings. The statistical testing revealed that BI rate, which is used as an indicator for external factors and JII (as Market factors), have a positive impact on the performance of Islamic equity mutual funds. In contrast, the past return does not affect the performance of Islamic equity funds. This study suggests that the investor must consider internal, and external factor in the investment activities.

Islamic Equity Fund Investment Styles

Islamic Equity Fund Investment Styles

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.

Determinant of Islamic Mutual Fund Performance: A Comparative Study Between Indonesia and 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>

Analisis Pengaruh Faktor Internal dan Faktor Ekternal terhadap Kinerja Reksa Dana Syariah Saham

This research aims to find out what things can affect the performance of Islamic equity funds. Four independent variables were taken based on research released and classified as internal factors (Stock Selection, Mutual Fund Age) and external factors (Jakarta Islamic Index and Inflation Rate) to initiate the relationships in the performace of sharia equity funds as the dependen variables. The performance of Islamic equity funds use the Sharpe method and calculated for 36 months from January 2017 to December 2019. Research data taken from secondary data published by Bareksa, Jakarta Islamic Index and Bank Indonesia. Research method uses quantitative-descriptive in path analysis model. The result shows that Stock Selection, Mutual Fund Age, and Jakarta Islamic Index significantly influence the performace of sharia equity funds. Meanwhile the Inflation Rate doesn’t significantly influence the performace of sharia 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.

ISLAMIC PUBLIC EQUITY FUNDS: ENHANCING HALAL SUSTAINABILITY THROUGH MAQASID SHARIAH FRAMEWORK

Capital market investors in Malaysia have the choice of whether to invest in conventional funds or in Shari’ah compliant funds. However, Islamic law (Shari’ah) is concerned with the moral or ethical value of commercial transactions. Basically, the Muslims are governed by the rules and regulations in respect of halal (permissible) and haram (prohibited). Hence, the objective of the study has been explored the Shari’ah compliant funds products which based on the Maqasid Shari’ah framework due to the five preservations or protections (Protection of Religion, Protection of Life, Protection of Intellect, Protection of Progeny and Protection of wealth). Most of the products offered and developed in Shari’ah compliant public equity funds should be in line with the Maqasid Shari’ah perspective as sustainable of financial planning which bring to the social well-being and impartiality for the public interest (maslahah) by taking into consideration of five preservation, namely the preservation of religion (al-ddin), the preservation of life (al-nafs), the preservation of intellect (al-all), the preservation of progeny (al-nasl) and the preservation of wealth (al-mal). Therefore, it is important not only in developing Islamic equity funds as a part of industry growing but then beyond that to fulfill the needs of Muslims as well for all the others as well as enhancing halal sustainability through Islamic equity funds product development.

An investigation into factors that determine the growth rate in the Islamic banking and finance

The purpose of this study is to determine the impact of products and services of Islamic finance in Pakistan. This study has involved an empirical analysis of the environmental factors of growth and its impact on the growth of Islamic Financial Institutions. To investigate the factors of growth, a structural equation model develops that incorporates the main determinants of growth of banking assets and equity funds. The growth in the Islamic equity funds and banking assets has been identified as definite antecedents of growth in the Islamic financial system. The empirical investigation by the structural model using Pakistani dataset revealed that four out of ten hypotheses were significant including two direct paths as antecedents of annual growth. This study provides empirical support for the influence of some development factors to control the barriers of growth in the Islamic finance industry. This paper allows the identification of the major development factors of Islamic financial system that takes into account the importance of operational strategy and environment for the growth of Islamic equity funds and banking assets.