The Evaluation of Mutual Fund Perfromance in Pakistan

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THE EVALUATION OF MUTUAL FUND PERFORMANCE IN PAKISTAN

By
ANEES KHAN
FAISAL USMAN
A project report submitted to the Department of Accounting & Finance, Faculty of Management Sciences, International Islamic University, Islamabad in partial fulfillment of the requirements for the degree of BACHELOR OF BUSINESS ADMINISTRATION

(FINANCE)

Department of Accounting & Finance
Faculty of Management Sciences
International Islamic University Islamabad

THE EVALUATION OF MUTUAL FUND PERFORMANCE IN PAKISTAN

By
ANEES KHAN (2359-FMS/BBA/F08)
FAISAL USMAN (2379-FMS/BBA/F08)

BACHELOR OF BUSINESS ADMINISTRATION
(FINANCE)

Submitted To
SYED NAIF AMJAD

Department of Accounting & Finance
Faculty of Management Sciences
International Islamic University Islamabad
June 2011

Copyright© 2011 by Mr. Anees Khan and Mr. Faisal Usman
All rights are reserved. No part of this project report can be reproduced in any form or any means such as photocopy or electronic media etc. without prior approval of authors

Supervisor’s Certificate
This is certified that Mr. Anees Khan (2359-fms/bba/for) and Mr. Faisal Usman (2379-fms/bba/f08.) of BBA-18 have completed their project report entitled “The Evaluation of Mutual Fund Performance in Pakistan” under my supervision. I have checked this report and found it bonafide work of authors.

__________________ Mr. Syed Naif Amjad SUPERVISOR Assistant Professor

______________________
Dr. Zaheer Abbas
Head, Department of Accounting & Finance
Faculty of Management Sciences
International Islamic University Islamabad



Contents

INTRODUCTION6
TYPES OF MUTUAL FUNDS8
Open-ended Funds8
Close-ended Funds8
Types of Mutual Funds (By Objective)9
Money Market Funds9
Income Funds9
Islamic Funds9
Asset Allocation Funds9
Growth Funds9
ADVANTAGES OF MUTUAL FUNDS10
Diversification:10
Liquidity:10
Professional Management:10
Low Investment:10
Low Transaction Cost:10
A BRIEF HISTORY OF MUTUAL FUNDS10
LITERATURE REVIEW11
HYPOYHESIS11
SAMPLE12
METHODOLOGY12
RETURNS OF FUND12
SHARP MEASURE12
TREYNOR MEASURE13
JENSON DIFFERENTIAL MEASURE14
FAMA AND FRENCH FACTOR MODEL15
RELATIVE PERFORMANCE15
CONCLUSION17
REFERENCES18

List of Figures
Mutual Fund Process 1.1………………………………………………………...8 Picic Investment Verses Picic Growth Fund 1.2……………………………….18 Golden Arrow Selected Fund, First Capital M.F and Safeway M.F 1.3……….18 Overall Performance of Equity M.F 1.4…………………………………..........19

List of Tables
Return of Fund 2.1………………………………………………………………13 Sharp Ratio 2.2…………………………………………………………………..15 Trey nor Ratio 2.3……………………………………………………………….16 Jenson Differential Ratio 2.4………………………………………………….....17

THE EVALUATION OF MUTUAL FUNDS PERFORMANCE IN PAKISTAN

INTRODUCTION
Generally there are two ways of investment. One is direct investment and the second is indirect investment. The direct investment is one in which the individuals itself invest and the indirect is one in which the individuals gives his/her money to some institutions. Now direct investment is suitable for the person who has the knowledge, information and expertise of investing the money. But those investors who want to invest his/her money and want some return for their investment but they lack the information and don’t have the expertise to invest. So for those investors the mutual fund companies are the appropriate option. Mutual fund...
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