Analyzing Performance of Islamic and Conventional Funds Listed in Karachi Stock Exchange
Hamdard Institute of Management Sciences Hamdard University, Karachi
Associate Professor, Dow University of Health Sciences, Karachi
Abstract
Abstract The global financial crises of 2009 had a profound impact on international and domestic markets causing liquidity crunches and bailout appeals. It was at this juncture that previously ignored Islamic finance suddenly became a center of attention. Twenty one conventional equity funds and four Islamic equity funds are selected which survived at least for five years from 2009 to 2013.This study focuses on drawing a comparison in performance between open ended Islamic mutual funds and conventional mutual funds. Daily NAVs and dividend payout data are collected from the website of the Mutual Fund Association of Pakistan. Those funds are selected that have been in the market for at-least 5 years or those that have available daily returns for the same period. Standard deviation is used to measure the portfolio risk and the consistency of returns but since it is an absolute measure of risk we also use the coefficient of variation (CoV) ratio to calculate the relative measure of variability. Performance is measured by the common performance yardsticks; the Sharpe and Treynor ratios. This study found that conventional funds perform better in terms of average returns to investors than Islamic equity funds. However, both funds performed better than the market benchmark. The difference in key performance ratios of both funds was minimal suggesting the fact that Islamic mutual funds offer excellent growth potential in general and Islamic equity funds in particular.
Keywords: Performance, Islamic Equity Funds, conventional Equity Funds, Islamic Mutual Funds and Conventional Mutual Funds
