An Evaluation of Mutual Fund Performance in an Emerging Economy: The Case of Pakistan

This article examines the performance of Pakistan’s mutual fund industry during 2006–10, a period characterized both by bullish and bearish markets. An analysis of fund types reveals that Islamic funds have shown strong growth in spite of their lackluster performance compared to conventional funds. Income funds appear to have suffered as a consequence of the underdeveloped bond market, and very high t-bill rates have resulted in negative excess returns during the period. For stock funds, market indices and size are significant factors that indicate a preference for large-cap stocks of managers. With consistently negative or insignificant alphas, no fund manages to outperform the market.