ALUATION OF MUTUAL FUNDS AND SELECTION ABILITIES OF FUND MANAGERS IN PAKISTAN

Mutual funds are decent tools to encourage savings and investments, especially in developing nations like Pakistan which rely heavily on foreign aids. This study explores the mutual fund performance in Pakistan by using seven different performance measures, i.e. Sharpe, Treynor, Sortino, Information, Jensen Alpha, M2/RAP, Fama decomposition measures. This study covers a period ranging from July 2005 to June 2013 and includes 27 mutual fund schemes out of which 20 funds are open ended while 07 funds are closed ended. Results prove underperformance on the part of all the mutual funds and the whole industry was found weak on the part of the selection abilities of the fund managers and the portfolios were found less diversified. However, it was noticed that closed ended funds are better performers as compared to the open ended funds. Results were also inconsistent for the performance of individual funds as none of the funds had the same rankings with respect to all the measures used.