Mutual Funds Performance; Funds And Country Specific Characteristics: A

Comparative Study Of Pakistan And India Equity Funds

Introduction
Mutual funds showed increasing performance in recent decades due to investor’s preference in
alternative investment instruments to keep up with changing economic conditions and gain
higher returns. mutual funds give small investors opportunities and benefits of investment in
diversified portfolio which allows investors to invest in their choice of different types of debt or
equity fund for short, long and fixed time return with features such as liquidity and professional
management.
Investment company institute indicates that India and Pakistan have lowest number of mutual
funds as compared to other countries in Asia and pacific region such as china japan and Korea.
There are a number of factors that effects the performance of mutual funds such as supply-side
characteristics, demand snide characteristics, trade characteristics, management and country
specific characteristics which are not discussed while debating on mutual funds performance by
the researchers.
Literature Review
Mutual funds pool the investment of others and invested professionally by management
according to price, style, risk and size for advantages like easy investment process, liquidity and
economies of scale. Researches conducted in Pakistan regarding fund specific characteristics to
find out the mutual funds return showed that mutual fund industry is underperforming compared
to the benchmark because there is lack manager skills and capabilities. Factors like expense ratio,
turnover of assets, proportion of family has positive effects whereas load fee and liquidity have
negative effects on return of mutual funds. Also, in India there is volatility and inconsistency in
performance of mutual funds according to researchers conducted. Which led to conducting
research taking into consideration country specific characteristics in Pakistan and India.
Result Analysis
Results of the study showed that GDP, size, LIQ, and RIR have negative while CPI, AT, MGF
have positive impact on growth of mutual funds in Pakistan. Whereas AT, MGF are positively
and CPI, GDP, RIR, LIQ, and size are negatively related to performance of mutual funds.
1. both In Pakistan and India RIR has negative impact on mutual funds’ performance, increase in
interest rate decrease the performance of mutual funds and vice versa because whenever interest
rate increases investors prefer investment in securities with fixed interest rather than equity
mutual funds.
2. Management fee has positive impact in both cases as it is an indication of higher performance,
where management provide better opportunities for higher return.
3. Size of funds has negative impact on performance of mutual funds as larger funds show low
and smaller funds show high return because smaller fund managers have fewer opportunities to
actively seek.
4. GDP has negative impact in both cases as a well-developed economy provides more education
and skills to investors and management to analyses and assess investment opportunities more
wisely.
5. Assets turnover is positively related to mutual funds’ performance as the manager utilizes
assets more efficiently the more return he will get.
6. high liquidity leads to low performance as investors are more likely to liquidate their
investments which has negative impact in both cases.
7. CPI has negative in Pakistan and positive impact in India on mutual funds which shows a
significant impact on performance.
Conclusion
For those investors who do not have knowledge and skills to invest mutual fund is an easy
option. According to the study both fund and country specific characteristics have impact on
performance of mutual fund whereas India’s equity funds are more volatile than Pakistan so the
investors should take account for all such characteristics while making investments.