Performance of Mutual Fund of Bangladesh
Mutual Fund Performance in Bangladesh: An Analysis of Monthly Returns
Md. Hashibul Hassan* Tahmina Akhter†
Abstract
Extensive research has evaluated mutual fund performance in different financial markets which led to mixed results (Soderlind et al., 2000; Korkeamaki and Smythe, 2004); however, very limited work has been done to evaluate Bangladeshi mutual funds. This paper focused on measuring risk adjusted performance of 13 closed end mutual funds on the basis of monthly Net Asset Value. For this purpose methods suggested by Jensen, Treynor and Sharpe are employed. Performance of the selected funds found superior in compare to benchmark index. Furthermore diversification, market timing and selectivity skill of fund managers are tested. We found little amount of diversification, no statistically significant timing skill but good level of selectivity. Keywords: Net Asset Value, Reward to Volatility, Reward to Variability, Jensen alpha, diversification, Market Timing, Selectivity.
1. Introduction: A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities (Investopedia). As it is professionally managed this segment is very crucial to bring rationality in the market. In Bangladesh, the mutual funds were first introduced by the state-owned investment agency Investment Corporation of Bangladesh (ICB) in 1980. It launched some 8 close-end and one
* †
Lecturer, Department of Finance and Banking, Jatiya Kabi Kazi Nazrul Islam University, Trishal, Mymensingh. Lecturer, Department of Finance, University of Dhaka, Dhaka.
Mutual Fund Performance in Bangladesh: An Analysis of Monthly Returns
Page 1 of 23
Electronic copy available at: http://ssrn.com/abstract=1685455
unit fund till 2002, when it had to create 3 subsidiaries under an Asian Development Bank prescription, including the asset management company,
Md. Hashibul Hassan* Tahmina Akhter†
Abstract
Extensive research has evaluated mutual fund performance in different financial markets which led to mixed results (Soderlind et al., 2000; Korkeamaki and Smythe, 2004); however, very limited work has been done to evaluate Bangladeshi mutual funds. This paper focused on measuring risk adjusted performance of 13 closed end mutual funds on the basis of monthly Net Asset Value. For this purpose methods suggested by Jensen, Treynor and Sharpe are employed. Performance of the selected funds found superior in compare to benchmark index. Furthermore diversification, market timing and selectivity skill of fund managers are tested. We found little amount of diversification, no statistically significant timing skill but good level of selectivity. Keywords: Net Asset Value, Reward to Volatility, Reward to Variability, Jensen alpha, diversification, Market Timing, Selectivity.
1. Introduction: A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities (Investopedia). As it is professionally managed this segment is very crucial to bring rationality in the market. In Bangladesh, the mutual funds were first introduced by the state-owned investment agency Investment Corporation of Bangladesh (ICB) in 1980. It launched some 8 close-end and one
* †
Lecturer, Department of Finance and Banking, Jatiya Kabi Kazi Nazrul Islam University, Trishal, Mymensingh. Lecturer, Department of Finance, University of Dhaka, Dhaka.
Mutual Fund Performance in Bangladesh: An Analysis of Monthly Returns
Page 1 of 23
Electronic copy available at: http://ssrn.com/abstract=1685455
unit fund till 2002, when it had to create 3 subsidiaries under an Asian Development Bank prescription, including the asset management company,
References: (Dated: 15 April, 2010) Selection Trading code Name of the fund Manager Listing Year Closing year* Face Value Size at FV (in mn BDT) 50 200 Market Cap (in mn BDT) 483.63 558 NAV At Market (in mn BDT) 661 328.6 NAV to MKT Cap 0.73 1.70 P/E Ratio As par directive of SEC, No: SEC/CMRRCD/2006-157/10, Dated:24 January, 2010 Page 20 of 23 Mutual Fund Performance in Bangladesh: An Analysis of Monthly Returns