On the Performance of Egyptian Mutual Funds

Abstract

Purpose: The purpose of this research is to investigate the financial performance of Islamic and conventional mutual funds in the Egyptian financial market.

Design/methodology/approach: This research is based on analyzing the risk and return of Islamic and conventional mutual funds using financial performance and risk measures. The analysis is based on the weekly returns of a sample of 6 Islamic equity mutual funds and 15 conventional equity mutual funds from April 2008 to May 2015. Both the Egyptian market index and the Morgan Stanley Capital International indices for Egypt are used as market benchmarks for the Egyptian market.

Findings: The results show that Islamic mutual funds underperformed both conventional mutual funds and the Egyptian market index. As for risk measures, Islamic funds had the lowest total and systematic risk whether compared to conventional mutual funds or the Egyptian market indices. Thus, Islamic funds do provide hedging opportunities as showed during the period under study.

Practical implications: The low risk characteristics of Islamic mutual funds suggest that investment managers can use them as tools to adjust the risk features of relevant portfolios.

Originality/value: The research points out to Egyptian Islamic mutual funds' performance relative to other benchmarks. This area is relevant to investors who are attracted to Islamic Sharia compliant financial securities and other investors who are willing to reduce their overall risk levels.