Risk Adjusted Performance Evaluation of Balanced Mutual Fund Schemes in Pakistan

Abstract

Mutual fund existed since 1964 in Pakistan capital market carrying certain benefits like risk diversification, assured returns and professional management for the retail investors. Growth of this investment mode has not been in the parallel levels in Pakistan as is the case around the world but still mutual funds in Pakistan appeared to be highly competitive financial service industry. This research paper aimed to study the performance of some selected mutual fund schemes in Pakistan based on risk-return relationship and various measures. Five balanced schemes offered by various mutual funds in Pakistan are selected for this study from 2010 to 2013. The analysis has been made on the basis of mean return, beta risk, total risk, Sharpe ratio, Treynor ratio, Jensen Alpha and Fama’s decomposition measure. The empirical results reveal that average returns of selected portfolio are below from market returns, mix trend of risk in selected schemes and overall defensive beta values. In short results indicate underperformance of most of schemes during selected span of study.

Keywords: Risk adjusted performance, Balanced mutual fund, Treynor, Sharpe and Jensen’s Alpha measure. KSE 100