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INTRODUCTION

MFAP is the trade body duly licensed by the government of pakistan for the
mutual fund industry in pakistan.
All asset management companies (amcs) and investment advisory ( ias )
licensed by secp.

MUTUAL FUND
A mutual fund is a collective investment scheme.
Which specializes in investing a pool of money collected from investors.
It give small investors access to professionally managed, diversified
portfolios of equities, debt instruments.
The income earned through these investments are shared with its unit
holders in proportion to the number of units owned by them.

TYPES OF MUTUAL FUND


OPEN-ENDED MUTUAL FUNDS:
These Mutual funds continually create new units or redeem issued units on
demand.
These are also called Unit Trusts.
These units can be purchased and redeemed through Management Company.

CLOSED-ENDED MUTUAL FUNDS


Fixed number of shares like a public company are floated through an IPO.
Once issued, they can be bought and sold at the market rates in secondary
market (Stock Exchange).
The market rate is announced daily by the stock exchange.

CATEGORIES OF MUTUAL FUND


EQUITY SCHEME:
Is a fund that invests in equities more commonly known as stocks.
The objective of an equity fund is long-term growth.
Dividends and capital gain realized are also sources of revenue.

BALANCED SCHEME:
These funds provide investors with a single mutual fund that invests in both stocks and debt
instruments.
This diversification aimed at providing investors a balance of growth

ASSET ALLOCATION FUND:


These funds may invest its assets in any type of securities at any time available in the market.

CATEGORIES OF MUTUAL FUND


FUND OF FUND SCHEME:
These funds operate a diverse portfolio of equity, balanced, fixed income and money
market funds (both open and closed ended).

SHARIAH COMPLIANT (ISLAMIC) SCHEME:


Invest in shariah compliant securities i.E. Shares, sukuk, ijara sukuks etc.
These funds can be offered under the same categories as those of conventional funds.

CAPITAL PROTECTED SCHEME:


The payment of original investment is guaranteed with any further capital gain
THESE funds are for a specific period.

CATEGORIES OF MUTUAL FUND


INCOME SCHEME:
Focus on providing investors with a steady stream of fixed income.
They invest in short term and long term debt instruments like tfcs, government
securities.

MONEY MARKET SCHEME:


These are safest and most stable of all the different types of mutual funds.
These funds invest in short term debt instruments such as treasury bills and bank
deposits.

SAMPLE
Only open- ended mutual fund schemes have been considered.
Data was taken from the site of pakistan mutual fund i.E. Www.Mupaf.Com.Pk
Data sample consist of 8 mutual funds taken from a period from january
2012 to january 2015.
It consist of 37 observation for each fund.
Data for index was collected from kse website.
The risk free rate i.E. Kibor rate from the state bank of pakistan website.

SHARPE RATIO:
The sharpe ratio determines the expected realized return over that minimum. Within
the risk-reward framework of portfolio theory, higher risk investment should produce
high returns. As a result, a high sharpe ratio indicates superior risk adjusted
performance.

SORTINO RATIO:
The sortino ratio, on the other hand, only includes the downside standard deviation.

TREYNOR RATIO:
Beta is used as the risk measure to standardize performance instead of standard
deviation.

METHODOLOGY
JENSENS ALPHA (ALPHA):

RPT RFT = P + P (RMT - RFT) + PT ..............................


Where, rpt = return on mutual fund scheme for the year t;
Rft = risk free return for the year t;
Rmt = return on the market portfolio in year t
p=alpha;
p =beta of the portfolio and
pt = error term

INFORMATION RATIO:
In contrast to the sharpe, sortino and roy's safety-first ratios, the information ratio uses the standard
deviation of active returns as a measure of risk instead of the standard deviation of the portfolio.

HYPOTHESES
H0: The sample mutual fund schemes do not perform efficiently.
H1: The expected return is greater than estimated return(benchmark return)
H2: The expected return is lesser than estimated return(benchmark return)
H3: Period of the mutual fund schemes is not related to their efficiency.
H4: Past performance of the mutual fund schemes is not related to their
efficiency.
H5: Risk () of the mutual fund schemes is not related to their efficiency.

ANALYSIS AND DISCUSSION

hbl
money
market

treynor
rank

rank

jensen Alpha

nafa
stock

lakson
income

0.0234

-0.0995

0.7474

0.0108

0.4047

0.0013

-1.0159

-0.557

0.3688

0.2921

-0.5326

0.252

-0.8882

0.0175

-0.7176

information

js income

-0.2169

sortino

niut

alfalah
ghp
alpha

-0.3161

sharp

hbl
income

nit
governme
nt bond

-0.5004

-1.1609

0.6584

-1.0702

-0.0075

-0.2846

-0.0509

-0.0066

-0.494

-0.8781

0.001

0.3939

-1.0313

-0.0087

-0.7023

-0.2043

0.0059

-1.086

-0.0141

0.204

-0.3125

-0.0057

-0.0204

TREYNOR RATIO
Treynor ratio measures how much excess returns a fund has generated
relative to the market risk it is exposed to.
Five of our fund gives positive ratios as per market risk.
Js income fund gives the highest ratio of return than the risk in the market
And the HBL income fund is highly effected by market risk at it is the negative
return

SHARP RATIO
Sharpe ratio measures how much excess returns a fund has generated
relative to the total risk it is exposed to
Only four of the funds give positive ratio against the risk fund is facing.

SORTINO RATIO
The sortino ratio, on the other hand, only includes the downside deviation.
This means only the volatility that produces fluctuating returns below a
specified benchmark is taken into consideration
Only three funds are efficient against risk. And they gives excessive return than
the minimal acceptable return.

INFORMATION RATIO
Sortino ratio, the information ratio uses the standard deviation of active
returns as a measure of risk instead of the standard deviation of the portfolio.
None of our return gives a positive return according to the risk of the standard
deviation.

Hypothesis:
We accept our H1 and H2 hypothesis

LIMITATION AND RECOMMENDATION


The data taken was of very few period time.
It doesnot consider other risk in the market like size, value and unsystematic
risk.
Historical return pattern has not been considered.
Comparison cannot be made on the bases of only expected returns.
Other cost like transaction cost, taxes and inflation rate has not been
included.

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