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Proceedings of the International Conference for Bankers and Academics 2016, Dhaka

(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

MUTUAL FUND PERFORMANCE IN BANGLADESH AN EMPIRICAL STUDY


Ishrat Jahan
Southern University, Bangladesh
ABSTRACT
Mutual fund is one of the important instruments for the development of capital market through offering investment
outlets to the investors and financing industries of any country. Mutual funds in Bangladesh is still at infant stage as
compared to other Asian countries like India, Philippine, Japan, etc with respect to size of investment, types of
investment, operating efficiency, market size, local-foreign participants, legal infrastructure, hedging funds, etc. As
of now, there are 50 mutual funds being managed by 10 Asset Management Companies (AMCs) on fixed amount of
fees not linked to the performance. The performance of mutual funds depends mostly on the effective role and
strategies of AMCs amongst important factors. The study has found through review of literature and talking to the
professionals that very few number of studies on mutual fund performance in Bangladesh have been conducted.
Besides, the methodology of performance and size of samples of the previous studies are not adequate. In view of
this, the present study has been undertaken aiming at evaluating mutual fund performance in Bangladesh. The study
has covered all the mutual funds that have completed five years of operations by 2013 and used secondary data,
collected from published annual reports. The study has used financial measures-relevant financial ratios, descriptive
statistical measures, and mutual fund performance models such as Sharpe model, Treynor Model, and Jensen Model,
etc. Besides, it has done both time series analysis and cross sectional analysis for measuring exclusive performance
of mutual funds operating in Bangladesh. The study has indentified that most of the sample funds have failed to
produce return equal to or more than industry average and only few sample mutual funds have produced total return
more than industry average of total return. The study has found that most of the funds are undervalued for market
inefficiency in managing funds. An analysis of investment certificates of mutual funds has exposed that AMCs have
been inconsistent in investment as well as strategy being pursued across study periods. The study has suggested
some pragmatic policy measures for improving the performance of mutual funds through linking fees to the
performance, consistent growth and efficiency across investment periods.
JEL classifications: G11, G12
Key words: Mutual fund, Security, Internal Rate of Return, Net Asset Value and Performance measures.
Corresponding authors e-mail address: ijahan23@gmail.com
STATEMENT OF THE PROBLEM
Mutual fund performance can be conducted by employing different measures. There exist a huge number of
literatures on the mutual fund performance outside Bangladesh; but no comprehensive study on this aspect has so far
been made in Bangladesh. So, the study has reviewed some of the literatures on mutual fund performance in order to
know the inferences and to decide the techniques to be used for judging the performance of mutual fund.
Some of the previous studies on mutual funds performance includes that have documented superior
performance by active fund managers (e.g. Moskowitz, 2000; Edwards and Caglayan, 2001; Kosowski, 2006). For
example, Moskowitz (2000) shows that active management is able to beat passive indexes by as much as 6 percent
during recessionary periods. Similar results were found by Kosowski (2006). However, there are a number of studies
that have shown poor performance by active funds during market downturns (e.g. Souza and Lynch, 2012; Pfeiffer
and Evensky, 2012).In a recent article published by Vanguard Investment and Counseling Research, the author finds
very little evidence of superior active management performance during market downturns and further states that in
fact, active managers have not consistently delivered superior performance relative to a benchmark during such
periods. In another article published by the same firm in 2009, the authors find that since 1970, active fund
managers failed to outperform broader stock market 4 out of 7 bear markets. These mixed findings strongly suggest
that while there is some evidence that fund managers may demonstrate superior stock picking skills during bear
markets, but it is not the case with every bear market or every fund manager. The classic research by Jensen (1968)
shows that on average, funds do not outperform the passive benchmarks and any over-performance is mainly due to
luck. Several other research articles (e.g. Malkiel, 1995; Gruber, 1996; Carhart, 1997) supported Jensens findings.
On the other hand, a few studies did find over-performance by actively managed mutual funds. For example, using
the quarterly portfolio holdings data, Grinblatt and Titman (1989) documented a positive abnormal performance by
their sample funds especially by growth and aggressive growth funds. Later studies (e.g. Grinblatt and Titman,

560

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka
(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

1993; Grinblatt, Titman, and Wermers, 1995; Wermers, 1997) also suggested superior performance by actively
managed mutual funds.
However, most of these findings also showed that positive alpha when gross return of funds was used as the
excess return and positive alpha dissipated when gross return was replaced by net return (net of expenses) as the
dependent variable. Some of the studies used flow of funds as the reason behind underperformance of actively
managed mutual funds. Berk and Green (2004) suggested that performance deteriorates for those funds that attract
higher inflow of funds in the previous period while performance improves for those that experienced higher outflow
of funds in the previous period. The suggestions of Berk and Green (2004) find support from the popular mean
reverting theory of finance. In a related study, Pollet and Wilson (2008) also suggested that flow of funds causes
funds to underperform. Their arguments rest on the assumption that managers best ideas are limited and more
money causes them to purchase the same stocks at a higher price which deteriorates performance of those funds in
the following period. Sapp and Yan (2008) analyzed performance of focused funds. Their selection of sample was
based on the number of holdings of a diversified fund. Their findings show that focused funds (funds with relatively
less number of holdings) underperform both on gross return as well as net return basis. In a similar study, Shawky
and Smith (2005) suggested a quadratic relation between the number of holdings and risk-adjusted return for
actively managed mutual funds.
Sharpe (1966) suggested a measure for the evaluation of portfolio performance. Drawing on results
obtained in the field of portfolio analysis, economist Treynor (1965) has suggested a new predictor of mutual fund
performance, one that differs from virtually all those used previously by incorporating the volatility of a fund's
return in a simple yet meaningful manner. Jensen (1967) derived a risk-adjusted measure of portfolio performance
(Jensens alpha) that estimates how much a managers forecasting ability contributes to funds returns. A syndicated
by Statman (2000), the SDAR of a fund portfolio is the excess return of the portfolio over the return of the
benchmark index, where the portfolio is leveraged to have the benchmark indexs standard deviation.
S.Narayan Rao , et. al., evaluated performance of Indian mutual funds in a bear market through relative
performance index, risk-return analysis, Treynors ratio, Sharpes ratio, Sharpes measure , Jensens measure, and
Famas measure. The study used 269 open-ended schemes (out of total schemes of 433) for computing relative
performance index. Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally
used for further analysis. The results of performance measures suggest that most of mutual fund schemes in the
sample of 58were able to satisfy investors expectations by giving excess returns over expected returns based on
both premium for systematic risk and total risk. Bijan Roy, et. al., conducted an empirical study on conditional
performance of Indian mutual funds. This paper uses a technique called conditional performance evaluation on a
sample of eighty-nine Indian mutual fund schemes .This paper measures the performance of various mutual funds
with both unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton model. The
effect of incorporating lagged information variables into the evaluation of mutual fund managers performance is
examined in the Indian context. The results suggest that the use of conditioning lagged information variables
improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of
negative timing coefficients.
In view of these mutual fund structures in Bangladesh, the study has evaluated performances of mutual fund by
employing different statistical measures, characteristic measures of performance, and model based performance
measures.
OBJECTIVE OF THE STUDY
The principal objective of this study is to evaluate the mutual fund performance in Bangladesh. To accomplish the
main objective following specific objectives have been covered.
a) To examine the Mutual Fund Performance of sample mutual funds on descriptive statistical measures as
well as line graph.
b) To examine the Mutual Fund Performance of sample mutual funds on mutual fund performance models as
well as financial measures.
c)
To suggest some pragmatic policy measures for improving mutual funds performance in Bangladesh
capital market.

561

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka
(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

SCOPE OF THE STUDY


Currently, there are fifty (50) mutual funds under 17 Asset Management Companies operating in Bangladesh capital
market. The study would cover performance of all mutual funds that have completed five operating years by 2013.
In total, 18 mutual funds, comprising both close-end and open-end funds over the period 2009-2013 was considered
in this study. The sample mutual funds are as follows:1st ICB Mutual Fund, ICB Unit Fund, 2nd ICB Mutual Fund,
3rd ICB Mutual Fund, 4th ICB Mutual Fund, 5th ICB Mutual Fund, 6th ICB Mutual Fund, 7th ICB Mutual Fund,
8th ICB Mutual Fund, ICB AMCL 1st M.F, ICB AMCL Unit Fund, ICB AMCL Islamic Mutual Fund, ICB AMCL
Pension Holders Unit Fund, ICB AMCL 1st NRB Mutual Fund, ICB AMCL 2nd NRB Mutual Fund, Aims 1st
Guaranteed Mutual Fund, Grameen Mutual Fund One and Grameen One : Scheme Two.
METHODOLOGY OF THE STUDY
The study had used only secondary data for accomplishing the objective of the study.
Collection of Secondary Data
The study has used secondary data substantially. Secondary data for the study have been collected from following
available published sources:
i) Annual reports of the both Asset Management Companies and Mutual Funds.
ii) Journal, articles, government publications, existing research publications, documents, books, Bangladesh
Economic Survey, Financial sector review.
Methods of Analysis
The collected information has been processed, tabulated, analyzed and graphically presented in order to make this
study more informative, useful and purposeful. The relevant mathematical and statistical analysis is done manually
to find out the frequency distribution and other analysis. The final conclusion is drawn on the basis of financial
techniques and statistical techniques including Mean ( X ), Standard Deviation (S.D) and Co-efficient of Variation
(C.V) etc.
ORGANIZATION OF THE STUDY
The study had been organized into three sections. Section one presents a general introduction to the study. This
provides an overview of the study, including the statement of the problem, its main objectives and methodology
followed in the research. The second section present findings and their analysis. Finally third section suggest a set
of comprehensive policy measures for performance of mutual fund industry of Bangladesh most effective.
FINDINGS AND TREIR ANALYSIS
The study has evaluated performances of mutual fund by employing different statistical measures, characteristic
measures of performance, and model based performance measures .The study has evaluate the performance in the
following paragraph:
Evaluation of Mutual Fund Performance on Descriptive Statistical Measures
The study has evaluated performance of mutual funds understudy by employing performance characteristic
measures such as total return, internal rate of return, differential return, and variance measures. The evaluation
process on characteristics based performance measures has been described in the following paragraphs:

Evaluation of Mutual Fund Performance on Performance Characteristic Measures-Total Return


Total Return being an absolute measure provides investors an understanding of ability of fund to produce a positive
or negative return on total funds used. The general phenomenon is that the higher the total return of a fund, the better
the fund performs in a given period of investment.

562

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka
(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

TABLE 1. TOTAL RETURN OF MUTUAL FUNDS UNDERSTUDY [PORT FOLIO RETURN (PO)]
Year
Mutual Fund
1) 1st ICB M. F.
2)

nd

2 ICB M. F.
rd

2009

2010

2011

2012

2013

45.30%

73.00%

12.35%

4.71%

-7.70%

Expected Total
Return
25.53%

57.03%

113.75%

6.60%

-6.25%

19.30%

38.09%

3)

ICB M. F.

49.40%

120.16%

2.69%

-1.63%

31.43%

40.41%

4)

4th ICB M. F.

36.12%

110.71%

1.47%

-15.88%

39.06%

34.30%

th

5)

ICB M. F.

24.77%

88.05%

8.78%

-14.96%

23.51%

26.03%

6)

6th ICB M. F.

42.34%

97.64%

9.94%

-11.97%

14.29%

30.45%

th

ICB M. F.

44.85%

90.17%

4.70%

-3.78%

4.54%

28.09%

th

ICB M. F.

35.96%

93.68%

10.33%

-4.96%

2.67%

27.54%

20.74%

4.59%

1.18%

0.33%

0.75%

5.52%

10) Grameen M. F. One

258.26%

230.39%

41.96%

-17.00%

78.55%

118.43%

11) Grameen One : Scheme 2

142.00%

207.87%

52.09%

11.23%

76.10%

97.86%

st

39.62%

87.42%

7.17%

-20.60%

-6.25%

21.47%

nd

13) ICB AMCL 2 NRB M. F.

11.44%

77.00%

4.19%

-17.95%

-11.06%

12.72%

14) ICB AMCL Unit Fund

11.85%

41.31%

-7.01%

-14.98%

4.63%

7.16%

15) ICB AMCL 1 M. F.

32.43%

90.03%

3.78%

-28.23%

-20.95%

15.41%

16) ICB AMCL Pension Holders


U. F.
17) ICB Unit Fund

32.03%

37.26%

-9.91%

-20.74%

-0.48%

7.63%

16.53%

32.64%

20.04%

-17.51%

8.61%

12.06%

18) ICB AMCL Islamic M. F.

31.33%

51.41%

-1.30%

-14.98%

-8.25%

11.64%

Mutual Fund Industry Average

51.78%

91.50%

9.39%

-10.84%

13.82%

31.13%

Maximum Limit

258.26%

230.39%

52.09%

11.23%

78.55%

Minimum Limit

11.44%

4.59%

-9.91%

-28.23%

-20.95%

Range (Maximum Minimum)

246.82%

225.80%

62.00%

39.47%

99.50%

Standard Deviation (S.D)

58.90%

55.96%

15.40%

10.15%

27.67%

Coefficient of Variation (C.V)

113.75%

61.15%

164%

-93.60%

200.24%

7)

8)

9)

AIMS 1ST Guaranteed M.F.

12) ICB AMCL 1 NRB M. F.

st

Source: Annual Reports of Mutual Funds 2009-2013


Notes: Data have been compiled by the researcher. Calculations have been made on SPSS

It is evident from the analysis of data in Table 1 that the average total return of the mutual fund industry is 31.13%.
The study has found that the total return of only five mutual funds such as 2nd ICB mutual fund, 3rd ICB mutual
fund, 4th ICB mutual fund, Grameen mutual fund One, and Grameen mutual fund One: Scheme 2 is higher than
industry average of total return, and that of remaining 13 mutual funds understudy is lower than the industry average
of total return. This implies that a minimum number of mutual funds are performing better in the mutual fund
industry. It is also observed that the performance of mutual fund industry is gradually declining over the study
periods. The industries averages of total return for five years are 51.78%, 91.50%, 9.39%, -10.84%, and 13.82%
respectively. This scenario of mutual fund performance is truly reflecting real scenario of the stock market in
Bangladesh during the study periods.
From the examination of above table, it has been observed that the range between maximum total return
and minimum total return are showing U tendency, indicating the movement of stock market from up down-up.
These variations have contributed to the higher-lower-higher standard deviation in actual return from expected total
return of mutual fund industry across study periods. Besides, the coefficient of variation in actual total return from
expected total return of mutual fund industry in the study period of 2012 is the lowest of all, indicating a consistent
profitability performance of mutual fund industry. The mutual fund industry remained more volatile in the
remaining study periods. This implies that the performance of mutual fund industry depends on the performance of
both stock market and money market of a country. The trends in total return of mutual fund industry have been
visualized through figure 1 as follows:

563

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka
(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

FIGURE 1. THE AVERAGE TOTAL RETURN OF MUTUAL FUNDS INDUSTRY

Expected total Return


1st ICB M. F.
2nd ICB M.
3rd ICB
4th ICB
5th ICB
6th ICB
7th ICB
8th ICB
AIMS 1ST
Grameen
Grameen
ICB AMCL
ICB AMCL
ICB AMCL
ICB AMCL
ICB AMCL
ICB Unit
ICB AMCL

140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%

Industry Average

Source: Annual Reports of Sample Mutual Funds


Notes: Data have been compiled by the researcher

From the analysis of Figure1, it has been found that most of the sample funds have failed to produce return equal to
or more than industry average and only five sample mutual funds have produced total return more that industry
average of total return. This implies that only a few numbers of mutual funds are dominating the mutual fund
industry and the maximum numbers of sample mutual funds are found to be underperformed.
Evaluation of Mutual Fund Performance on Performance Characteristic Measures- Internal Rate of Return
(IRR)
Internal Rate of Return (IRR) is considered to be true measure of return on mutual fund. This provides investors and
other stakeholders an eye view of return which is required to be earned by the fund manager if the fund likes to
generate value at the expected or target return.
TABLE 2. INTERNAL RATE OF RETURN OF MUTUAL FUNDS UNDERSTUDY
Funds under Study

1.
2.
3.
4.

1st ICB M. F.
2nd ICB M. F.
3rd ICB M. F.
4th ICB M. F.

2009
45.30%
57.03%
49.40%
36.12%

2010
73.00%
113.75%
120.16%
110.71%

2011
12.35%
6.60%
2.69%
1.47%

2012
4.71%
-6.25%
-1.63%
-15.88%

2013
-7.70%
19.30%
31.43%
39.06%

Expected Index
25.53%
38.09%
40.41%
34.30%

5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

5th ICB M. F.
6th ICB M. F.
7th ICB M. F.
8th ICB M. F.
AIMS first Guaranteed M.F
Grameen M. F. One
Grameen One : Scheme Two
ICB AMCL Islamic M. F.
ICB AMCL 1st NRB M. F.
ICB AMCL 2nd NRB M. F.
ICB AMCL Unit Fund
ICB AMCL 1st M. F.

24.77%
42.34%
44.85%
35.96%
-29.26%
258.26%
142.00%
31.33%
39.62%
44.39%
7.98%
30.51%

88.05%
97.64%
90.17%
93.68%
458.64%
230.39%
207.87%
51.41%
87.42%
77.00%
41.31%
90.03%

8.78%
9.94%
4.70%
10.33%
117.54%
41.96%
52.09%
-1.30%
7.17%
4.19%
-7.01%
3.78%

-14.96%
-11.97%
-3.78%
-4.96%
32.54%
-17.00%
11.23%
-14.98%
-20.60%
-17.95%
12.39%
-28.23%

23.51%
14.29%
4.54%
2.67%
75.40%
78.55%
76.10%
-8.25%
-6.25%
-11.06%
-92.06%
-20.95%

26.03%
30.45%
28.09%
27.54%
130.97%
118.43%
97.86%
11.64%
21.47%
19.31%
-7.48%
15.03%

16.81%
13.00%
49.47%
258.26%
-29.26%
287.52%
61.55%
124.42%

37.26%
26.51%
116.39%
458.64%
26.51%
432.13%
100.02%
85.94%

-9.91%
21.11%
15.92%
117.54%
-9.91%
127.45%
29.62%
186.14%

-20.74%
-17.51%
-7.53%
32.54%
-28.23%
60.78%
15.02%
-199.38%

-0.48%
8.61%
12.60%
78.55%
-92.06%
170.61%
40.39%
320.71%

4.59%
10.34%
37.37%

17. ICB AMCL P. Holders Unit Fund


18. ICB Unit Fund
Mutual Fund Industry Average
Maximum Limit
Minimum Limit
Range (Maximum Minimum)
Standard Deviation (S.D)
Coefficient of Variation (C.V)
Source: Annual Reports of Mutual Funds.

564

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka
(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3
Notes: Data have been compiled by the researcher. Calculations have been made on SPSS and Excel Measures.

From the examination of Table 2, it has been found that the average expected Internal Rate of Return of the
mutual fund industry is 37.37%. The study has found that the total return of only five mutual funds such as 2nd ICB
mutual fund, 3rd ICB mutual fund, AIMS first guaranteed mutual fund, Grameen mutual fund One, and Grameen
mutual fund One: Scheme 2 is higher than industry average of total return, and that of remaining 13 mutual funds
understudy is lower than the industry average of total return. This implies that a minimum number of mutual funds
are performing better in the mutual fund industry. It is also observed that the performance of mutual fund industry is
gradually declining over the study periods. The industries averages of total internal rate of return for five years from
2009-2013 are 49.47%, 116.39%, 15.92%,-7.53%, and 12.60% respectively. This scenario of mutual fund
performance is truly reflecting real scenario of the stock market in Bangladesh during the study periods.
From the perusal of above table, it has been observed that the range between maximum total return and
minimum total return are indicating the movement of stock market from up down-up. Besides, the coefficient of
variation in actual total return from expected total return of mutual fund industry in the study period of 2012 is the
lowest of all, indicating a consistent profitability performance of mutual fund industry. The mutual fund industry
remained more volatile in the remaining study periods. In practice, the capital market performed very well with
respect to all parameters up to third quarter of 2011, and became volatile after third quarter of 2011 and onwards.
This implies that the performance of mutual fund industry depends on the performance of both stock market and
money market of a country. The trends in total return of mutual fund industry have been visualized through figure 2
as follows:
FIGURE 2. THE AVERAGE INTERNAL RATE OF RETURN OF MUTUAL FUNDS (EXPECTED IRR)
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20

Source: Annual Reports of Sample Mutual Funds;


Notes: Data have been compiled by the researcher

From the analysis of Figure 2, it has been found that most of the sample funds have failed to produce return equal to
or more than industry average and only five sample mutual funds have produced total return more that industry
average of total return. This implies that only a few numbers of mutual funds are dominating the mutual fund
industry and the maximum numbers of sample mutual funds are found to be underperformed.
Evaluation of Mutual Fund Performance on Performance Characteristic Measures-Differential Return (DR)
Differential return is a measure developed by Professor Jack Treynor. This measures the ability of fund managers
whether performance of fund is superior or inferior or neutral. The positive differential return indicates the superior
performance of mutual fund; negative differential return indicates the inferior performance of mutual fund; and zero
differential return indicates neutral performance of mutual fund. In other words, the positive differential return
indicates the ability of fund manager to add value to the capital; and vice versa.

565

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka
(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

TABLE 3. DIFFERENTIAL RATE OF RETURN (DR) OF MUTUAL FUNDS


Funds under Study
1. 1st ICB Mutual Fund
2. 2nd ICB Mutual Fund
3. 3rd ICB Mutual Fund
4. 4th ICB mutual Fund
5. 5th ICB Mutual Fund
6. 6th ICB Mutual Fund
7. 7th ICB Mutual Fund
8. 8th ICB Mutual Fund
9. AIMS first Guaranteed M.F
10. Grameen M. F. One
11. Grameen One : Scheme Two
12. ICB AMCL Islamic M. F.
13. ICB AMCL 1st NRB M. F.
14. ICB AMCL 2nd NRB M. F.
15. ICB AMCL Unit Fund
16. ICB AMCL 1st M. F.
17. ICB AMCL Pension Holders U. F.
18. ICB Unit Fund
Mutual Fund Industry Average
Standard Deviation (S.D)
Coefficient of Variation (C.V)
Maximum Limit
Minimum Limit
Range (Maximum Minimum)

2009
9.76%
-15.93%
2.68%
53.00%
92.20%
-0.42%
19.56%
-2.41%
247.11%
78.12%
41.32%
1.76%
-31.57%
9.53%
-25.54%
6.11%
5.60%
-64.25%
23.70%
67.19%

2010
16.08%
-16.26%
8.17%
62.23%
83.23%
2.99%
17.33%
-1.57%
141.21%
122.79%
86.87%
-1.16%
-12.17%
49.01%
-31.06%
25.00%
6.72%
-93.91%
25.86%
57.00%

2011
-6.23%
-10.63%
-18.36%
-33.78%
-45.09%
-10.32%
-18.37%
-9.28%
-196.11%
-53.19%
-41.91%
-3.57%
-6.86%
-12.29%
6.65%
-7.86%
1.19%
23.03%
-24.61%
46.77%

2012
-0.79%
-7.60%
-11.69%
-22.12%
-30.99%
-6.73%
-11.39%
-5.51%
-163.10%
-38.35%
-29.64%
-0.45%
-5.26%
-5.14%
9.29%
-3.91%
1.32%
13.32%
-17.71%
38.72%

2013
3.15%
-0.24%
-1.97%
-6.95%
-12.45%
0.39%
-2.44%
0.64%
-89.90%
-15.18%
-11.14%
3.59%
0.83%
1.39%
6.24%
1.61%
5.15%
10.69%
-5.92%
22.00%

283.50%
247.11%
-64.25%
311.36%

220.40%
141.21%
-93.91%
235.13%

-190.03%
23.03%
-196.11%
219.14%

-218.68%
13.32%
-163.10%
176.42%

-371.44%
10.69%
-89.90%
100.58%

Expected Index
4.71%
-12.61%
-4.80%
14.83%
24.84%
-3.62%
1.78%
-4.69%
7.28%
27.34%
14.16%
-0.85%
-13.96%
10.28%
-10.17%
4.84%
3.71%
-30.45%
1.81%

Source: Annual Reports of Mutual Funds.


Notes: Data have been compiled by the researcher. Calculations have been made on SPSS and Excel Measures.

From the examination of Table 3, it has been found that the average differential return of the mutual fund industry is
1.81%. The study has found that the total differential return of only nine mutual funds such as 1st ICB mutual fund,
4th ICB mutual fund, 5th ICB mutual fund, AIMS 1ST Guaranteed mutual fund, Grameen mutual fund One, and
Grameen mutual fund One : Scheme 2 , ICB AMCL 2nd NRB Mutual Fund, ICB AMCL 1st Mutual Fund and ICB
AMCL Pension Holders Unit Fund is higher than industry average of total differential return, and that of remaining
9 mutual funds understudy is lower than the industry average of total differential return. This implies that a 50% of
mutual funds are performing better in the mutual fund industry. It is also observed that the performance of mutual
fund industry is gradually declining over the study periods. The industries averages of total differential return for
five years from 2009-2013 are 23.70%, 25.86%, -24.61%, -17.71% and -5.92% respectively.
From the examination of above table, it has been observed that the range between maximum total
differential return and minimum total differential return are showing decline tendency, indicating the movement of
stock market downward. These variations have contributed to the higher-lower standard deviation in actual
differential return from expected total differential return of mutual fund industry across study periods from 2009 to
2013. Besides, the coefficient of variation in actual total differential return from expected total differential return of
mutual fund industry in the study period of 2011 is the lowest of all, indicating a consistent profitability performance
of mutual fund industry. The mutual fund industry remained more volatile in the remaining study periods. In
practice, the capital market performed very well with respect to all parameters up to third quarter of 2010, and
became volatile after third quarter of 2010 and onwards. The trends in total differential return of mutual fund
industry have been visualized through figure 3 as follows:

566

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ISBN 978-0-9925622-4-3

FIGURE 3. THE AVERAGE DIFFERENTIAL RATE OF RETURN OF MUTUAL FUNDS


(EXPECTED INDEX)
.400
.300
.200

Expected DR return

ICB Unit Fund

ICB AMCL

ICB AMCL 1st

ICB AMCL Unit

ICB AMCL 2nd

ICB AMCL 1st

ICB AMCL

Grameen One :

-.400

Aims 1st G. M.F.

8th ICB M. F.

7th ICB M. F.

6th ICB M. F.

5th ICB M. F.

4th ICB M. F.

-.300

3rd ICB M. F.

-.200

2nd ICB M. F.

-.100

1st ICB M. F.

.000

Grameen M. F.

.100

Industry Average

Source: Annual Reports of Sample Mutual Funds


Notes: Data have been compiled by the researcher

From the analysis of Figure 3, it has been found that most of the sample funds have failed to produce return equal to
or more than industry average and only nine sample mutual funds have produced total return more that industry
average of total return. This implies that only 50% mutual funds are dominating the mutual fund industry and the
50% of sample mutual funds are found to be underperformed.
Evaluation of Mutual Fund Performance on Performance Characteristic Measures-Variance Between excess of
portfolio return over risk free rate and expected excess market return on Jensen Model
Fund performance can be conducted on variance between excess of portfolio return over risk free rate and expected
excess market return on Jensen Model. This measure can be used to know whether fund performed under or over or
at par. Fund management performance can be judged on whether a fund is able to generate abnormal return or not.
Generally a fund with excess of differential portfolio return over the differential market portfolio return is said to be
generating abnormal return, and therefore, performing better than market; and the fund with deficit of differential
portfolio return over the differential market portfolio return is sail to be generating normal return or less than
normal, and therefore, performing not better than market. In this subsection, the study has attempted to judge the
performance of sample funds on the basis of abnormal return or normal return. Here the study has calculated
differential portfolio return as the difference between portfolio return and risk free rate of return and differential
market portfolio return as the difference between market portfolio return and risk free rate or return. Accordingly,
the study has measured excess or deficit of differential portfolio return over the differential market portfolio return
and shown in the Table 4 as follows:

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ISBN 978-0-9925622-4-3

TABLE 4. VARIANCE BETWEEN EXCESS OF PORTFOLIO RETURN OVER RISK FREE RATE AND
EXPECTED EXCESS MARKET RETURN ON JENSEN MODEL OF MUTUAL FUNDS
Year

2009

1st ICB

-0.04

UP

0.16

OP

-0.10

UP

-0.17

UP

2 ICB

-.308

UP

.246

OP

-.418

UP

-.427

3rd ICB

-0.44

UP

0.20

OP

-0.33

UP

-0.33

4th ICB

-0.78

UP

-0.13

UP

-0.12

UP

5th ICB

-1.48

UP

-0.74

UP

-0.11

6 ICB

-0.32

UP

0.19

OP

7th ICB
8th ICB

-0.53
-0.40

UP
UP

-0.06
0.16

UP
OP

AIMS first
G. M.F
Grameen
M.F. One
Grameen
Scheme 2
ICB AMCL
Islamic
ICB AMCL
1st NRB
M.F
ICB AMCL
2nd NRB
ICB AMCL
U.F.
1st ICB
AMCL
ICB AMCL
Pension
ICB Unit
Fund

11.45

OP

-3.48

1.03

OP

0.88

nd

th

-0.28

UP

-0.09

UP

-.204

UP

-0.22

UP

-0.08

UP

-0.20

-0.30

UP

0.08

OP

-0.25

UP

-0.36

UP

-0.14

UP

-0.57

-0.26

UP

-0.38

UP

-0.16

UP

-0.19

-0.26
-0.28

UP
UP

-0.31
-0.35

UP
UP

-0.26
-0.27

UP
UP

-0.28
-0.23

UP

-1.91

UP

-2.28

UP

-2.10

UP

0.33

0.30

OP

0.07

OP

-0.49

UP

0.19

OP

0.22

OP

0.91

OP

0.24

OP

-0.20

UP

0.27

OP

0.42

-0.15

UP

0.07

OP

-0.20

UP

-0.27

UP

-0.21

UP

-0.15

0.06

OP

0.49

OP

-0.36

UP

-0.46

UP

-0.27

UP

-0.11

0.04

OP

0.46

OP

0.02

OP

-0.18

UP

-0.12

UP

0.04

-0.08

UP

0.23

OP

-0.25

UP

-0.25

UP

-0.06

UP

-0.08

0.04

OP

0.41

OP

-0.06

UP

-0.31

UP

-0.24

UP

-0.03

0.08

OP

0.11

OP

-0.13

UP

-0.20

UP

-0.03

UP

-0.03

-0.33

UP

0.12

OP

-0.56

UP

-0.62

UP

-0.28

UP

-0.33

Y Y

Y Y

Performan
ce

2013
Average

Y Y

Perform
ance

2012

Perfor
mance

Perform
ance

2011

Y Y

Perfor
mance

2010

Mutual
Funds

Y Y

Source: Annual Reports of Mutual Funds.


Notes: Data have been compiled by the researcher. Calculations have been made on SPSS and Excel Measures
OP=Over Performed;
UP =Under Performed

From the examination of Table 4, it has been observed that most of the funds understudy have performed under and
least number of sample funds have performed over across study periods. The study has calculated the measures of
18 sample funds. The study has found on industry average that AIMS first Guaranteed Mutual Fund, Grameen
Mutual Fund One, Grameen One: Scheme Two, and ICB AMCL 2nd NRB Mutual Fund have been found to have
generated abnormal returns over the study periods and others, generated normal return. This indicates that the
former funds have performed better than market and the latter have performed under. It has also been observed that
AIMS first Guaranteed Mutual Fund, ICB AMCL 1st NRB Mutual Fund, and ICB AMCL 1st Mutual Fund have
performed better in first two years of study and performed under in the rest three of the study. On the other hand,
Grameen Mutual Fund one, Grameen One: Scheme Two, and ICB AMCL 1st NRB Mutual Fund., have performed
better across the whole study periods. In a nutshell, it can be said that the mutual fund industry could not outperform
the market during the study periods.
EVALUATION OF MUTUAL FUND PERFORMANCE ON MODEL BASED PERFORMANCE
MEASURES
There are many models used in judging the performance of mutual fund. The models are William Sharpe Model,
Jack Treynor Model, Jensen Model-Linear Regression Based Model and Differential Return, Famas Decomposition
of Return Model, etc. The performance analysis of mutual funds understudy on the basis of mutual fund
performance models has been done in the following sub-sections:

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ISBN 978-0-9925622-4-3

Evaluation of Mutual Fund Performance on Sharpe Index


Sharpe Index being a risk adjusted measure can be used for both judging performance of mutual fund vertically and
horizontally. An investor can select a fund on Sharpe Index. Generally, the higher index indicates better
performance of a fund and vice versa. The study has measured Sharpe Index and characteristics of this index such
as mean, standard deviation, maximum value, minimum value, range, and coefficient of variation, and Growth in
performance of funds over the study periods. These have been articulated and shown in Table 5 as follows:
From the perusal of Table 5, it has been found that the performances of mutual funds understudy have
varied significantly from year to year, and fund to fund. During the study period of 2009, it has been observed that
the Sharpe Index of ICB AMCL 1st Mutual Fund is the highest, and that of ICB AMCL Unit Fund is the lowest. The
average Sharpe Index of the mutual fund industry in the year 2009 is 1.808 which implies that the mutual fund
industry has offered a premium of 1.808 against one unit of total risk. It has been found that the share indices of Six
mutual funds- AIMS first Guaranteed Mutual Fund, Grameen One Mutual Fund , Grameen One : Scheme 2, , ICB
AMCL 2nd NRB Mutual Fund, ICB AMCL 1st Mutual Fund and . ICB AMCL Pension Holders Unit Fund are
higher than industry average and that of the remaining 12 mutual funds are lower than industry average. Besides,
the performance in form of Sharpe Index has varied @ of 2.246 across mutual funds understudy. This indicates
that most of the funds have performed very poor in the year 2009.
TABLE 5. MODEL BASED PERFORMANCE OF MUTUAL FUND ON SHARPE INDEX
Funds under Study

2009

2010

2011

2012

2013

Expected Index

st

0.333

0.924

0.051

-0.062

-0.189

0.211

XIV

nd

1.332

2.733

-0.016

-0.403

0.220

0.773

ICB M. F.

1.040

2.640

-0.104

-0.278

0.494

0.759

VI

ICB M. F.

0.511

1.966

-0.107

-0.482

0.544

0.486

XII

ICB M. F.

0.162

0.882

0.017

-0.288

0.154

0.185

XV

6. 6th ICB M. F.

1.021

2.593

0.076

-0.619

0.113

0.637

VII

1. 1 ICB M. F.
2. 2 ICB M. F.
rd

3. 3

th

4. 4

th

5. 5

Rank

th

ICB M. F.

0.803

1.880

-0.057

-0.326

-0.130

0.434

XIII

th

ICB M. F.

0.766

2.311

0.082

-0.415

-0.203

0.508

XI

1.985

0.518

0.136

0.028

0.090

0.552

IX

10 Grameen M. F. One

2.233

11.410

0.295

-0.215

0.568

2.858

11. Grameen One:Scheme 2

4.487

4.344

0.573

0.005

0.848

2.051

II

12. ICB AMCL Islamic M. F.

7. 7
8. 8

9. AIMS first Guaranteed M.F

0.951

2.003

-0.345

-0.890

-0.661

0.211

XIV

st

0.835

2.825

-0.002

-0.637

-0.383

0.527

nd

14. ICB AMCL 2 NRB M.F.

2.611

1.867

-0.089

-0.806

-0.630

0.590

VIII

15. ICB AMCL Unit Fund

0.103

1.644

-0.513

-0.857

-0.206

0.034

XVII

16. ICB AMCL 1 M. F.

9.243

2.460

-0.095

-0.895

-0.721

1.998

III

17. ICB AMCL Pension Holders U. F.

4.019

4.687

-0.809

-1.205

-0.448

1.249

IV

18. ICB Unit Fund

0.109

0.448

0.205

-0.502

-0.031

0.046

XVI

Mean

1.808

2.674

-0.039

-0.491

-0.032

0.784

Maximum Limit

9.243

11.410

0.573

0.028

0.848

Minimum Limit

0.103

0.448

-0.809

-1.205

-0.721

Range (Maximum-Minimum)

9.140

10.962

1.383

1.234

1.569

Standard Deviation (S.D)

2.246

2.456

0.301

0.344

0.453

Coefficient of Variation (C.V)

1.242

0.918

-7.739

-0.699

-14.298

Growth in Sharpe Index

0.680

1.919

1.170

1.616

1.374

13. ICB AMCL 1 NRB M. F.

st

Source: Annual Reports of Mutual Funds.

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ISBN 978-0-9925622-4-3
Notes: Data have been compiled by the researcher. Calculations have been made on SPSS and Excel Measures.

It has been found from the examination of performance of mutual funds understudy during 2010 of Table 5 that the
Sharpe Index of Grameen Mutual Fund One is the maximum and that of ICB unit Fund is the minimum. The
industry average Sharpe Index is 2.674 which indicate that the investment in mutual fund industry has offered a
premium of 2.674 against one unit to total risk. The mutual fund has performed better in 2010 as compared to 2009.
The Sharpe Indices of five mutual funds-2nd ICB, Grameen Mutual Fund One, Grameen One: Scheme 2, ICB
AMCL 1st NRB Mutual Fund and ICB AMCL Pension Holders Unit Fund are higher than the industry average, and
those of remaining 13 mutual funds are lower than the industry average. This shows a discouraging performance of
most of the mutual funds under study. Besides, the performance in form of Sharpe Index has varied @ of 2.456
across mutual funds understudy. All these measures on Sharpe Index indicate a better performance of mutual fund in
the year 2010 as compared to 2009. This better situation can be attributed to the better performance of stock market
in Bangladesh in the first three quarters of 2010.
It is evident from the analysis of mutual fund performance in 2011 of Table 5 that the industry average
Sharpe Index is negative ( -0.039). The Sharpe Index of Grameen One: Scheme Two is the maximum (+ 0.57) and
that of ICB AMCL Pension Holders Unit Fund is the minimum (- 0.809). Again the variation in Sharpe Index across
mutual funds understudy has been at the rate of 0.301 and Growth in Sharpe Index is 1.17. The very interesting fact
is that only eight funds 1st ICB Mutual Fund, 5th ICB Mutual Fund,6th ICB Mutual Fund, 8th ICB Mutual
Fund, , AIMS 1ST M.F, Grameen 1, Grameen Fund 2 and ICB unit Fund have managed positive premium for
total risk, and the rest have experienced negative and very worst performance in the year 2011. This worst
performance is truly reflecting the impact of stock market scam in the year 2011. In this year, the stock market of
Bangladesh has experienced an abnormal loss of market index due to incredible amount of fall of prices of almost all
securities. The causes for this stock market scam are irregular change in laws, manipulation in trading, ill behavior
of syndicate, inefficiency of stock market makers, etc.
The examination of Mutual Fund performance in the 2012 provides an unimpressive performance of funds in
terms of industry average Sharpe Index of negative (-0.49) with maximum Sharpe Index of AIMS first Guaranteed
Mutual Fund (+0.03) and minimum Sharpe Index of and ICB AMCL Pension Holders Unit Fund (-1.21). It is
noticeable that most of the funds have negative track of generating Sharpe Index ratios except two funds AIMS
first Guaranteed Mutual Fund and Grameen One : Scheme Two. All though the industry average is drastically low,
however this has shown a recovery of mutual fund industry in Bangladesh. This is due to the correction of market
prices of almost all securities of stock market in Bangladesh in the year 2012.
The Table 5 also shows the over performance of mutual fund in 2013 gives different insight of performances.
The industry average Sharpe Index is found to be negative (-0.03) with maximum limit of 0.85 (Grameen One:
Scheme 2) and minimum limit of -0.72 (ICB AMCL 1st Mutual Fund). The rate of variation in Sharpe Index across
mutual funds under study is found to be 0.45. Almost all mutual funds have earned negative Sharpe Index ratio
except few mutual funds such as 2nd ,3rd,4th,5th, 6th ICB Mutual Fund and AIMS 1st Mutual Fund, Grameen Mutual
Fund One , Grameen One : Scheme 2 . This implies that these funds have failed to generate positive rewards for
investors. However, most of the mutual funds have performed better in 2013 than 2012.
FIGURE 4. THE AVERAGE SHARPE INDEX OF MUTUAL FUNDS (EXPECTED INDEX)

ICB Unit

ICB

ICB

ICB

ICB

ICB

ICB

Grameen

Grameen

Aims 1st

8th ICB

7th ICB

6th ICB

5th ICB

4th ICB

3rd ICB

2nd ICB

Expected Index
1st ICB

4.000
3.000
2.000
1.000
0.000

Industry Index

Source: Annual Reports of Sample Mutual Funds


Notes: Data have been compiled by the researcher

The overall performance of mutual fund industry in Bangladesh is found most consistent in the year 2010 and
most volatile in the year 2012. The study has ranked all mutual funds understudy on an average Sharpe Index Ratio

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ISBN 978-0-9925622-4-3

for the whole study periods. It has been found that mutual funds understudy have been ranked as in order to
Grameen One Mutual Fund, Grameen One: Scheme 2, ICB AMCL 1st Mutual Fund, ICB AMCL Pension Holders
Unit Fund, 2nd ICB, 3rd ICB, 6th ICB, ICB AMCL 2nd NRB, AIMS first Guaranteed Mutual Fund ,ICB AMCL 1st
NRB Mutual Fund etc as is shown in last column of Table 5.
Evaluation of Mutual Fund Performance on Treynor Index
Treynor Index being a risk adjusted measure can be used for both judging performance of mutual fund vertically and
horizontally. An investor can select a fund on Treynor Index. Generally, the higher index indicates better
performance of a fund and vice versa. The study has measured Treynor Index and characteristics of this index such
as mean, standard deviation, maximum value, minimum value, range, and coefficient of variation, and Growth in
performance of funds over the study periods. These have been articulated and shown in Table 6 as follows:
TABLE 6. THE MODEL BASED PERFORMANCE OF MUTUAL FUNDS UNDERSTUDY ON TREYNER I NDEX
Funds under Study
1.
1st ICB M. F.
2.
2nd ICB M. F.
3.
3rd ICB M. F.
4.
4th ICB M. F.
5.
5th ICB M. F.
6.
6th ICB M. F.
7.
7th ICB M. F.
8.
8th ICB M. F.
9.
AIMS first Guaranteed M.F
10. Grameen M. F. One

2009
19.325
-1.046
-3.585
0.331
0.103
-1.960
1.787
-1.305
4.635

2010
4.948
-3.833
33.729
1.433
0.820
-27.820
5.548
-9.560
2.580

2011
0.166
-0.016
-0.078
-0.062
0.013
0.067
-0.044
0.082
0.238

Treyner Index
2012
-0.160
-0.283
-0.168
-0.247
-0.188
-0.396
-0.200
-0.295
0.038

2013
-0.410
0.140
0.281
0.271
0.095
0.066
-0.073
-0.128
0.105

Expected Index
4.774
-1.008
6.036
0.345
0.169
-6.009
1.404
-2.241
1.519

Rank
II
XIV
I
X
XI
XVIII
V
XVI
IV

1.924

1.481

0.252

-0.172

0.435

0.784

VII

11. Grameen One : Scheme Two


12. ICB AMCL Islamic M. F.

2.189
-1.728

1.922
-5.281

0.400
-0.346

0.004
-0.701

0.499
-0.451

1.003
-1.701

VI
XV

13. ICB AMCL 1st NRB M. F.

-0.410

-3.569

-0.003

-0.598

-0.284

-0.973

XIII

14. ICB AMCL 2nd NRB M. F.


15. ICB AMCL Unit Fund

1.855
-0.048

1.270
-0.754

-0.069
-10.456

-0.551
-5.367

-0.390
-0.227

0.423
-3.371

IX
XVIII

16. ICB AMCL 1st M. F.

-4.805

3.355

-0.101

-0.812

-0.586

-0.589

XII

17. ICB AMCL Pension Holders U. F.

-3.951

20.938

-1.240

-1.018

-0.341

2.877

III

18. ICB Unit Fund

-0.057
0.736
19.325
-4.805
24.130
5.212
7.077

-0.210
1.500
33.729
-27.820
61.549
12.224
8.150

-0.355
-0.642
0.400
-10.456
10.856
2.474
-3.855

3.351
-0.431
3.351
-5.367
8.718
1.535
-3.560

0.609
-0.021
0.609
-0.586
1.195
0.354
-16.513

0.668
0.228

VIII

Mutual Fund Industry Average


Maximum Limit
Minimum Limit
Range (Maximum Minimum)
Standard Deviation (S.D)
Coefficient of Variation (C.V)

Source: Annual Reports of Mutual Funds.


Notes: Data have been compiled by the researcher. Calculations have been made on SPSS and Excel Measures.

From the examination of Table 6, it has been found that the performances of mutual funds understudy have varied
significantly from year to year, and fund to fund. During the study period of 2009, it has been observed that the
Treynor index of 1st ICB Mutual Fund is the highest, and that of ICB AMCL 1ST Mutual Fund is the lowest. The
average Treyner Index of the mutual fund industry in the year 2009 is 0.736 which implies that the mutual fund
industry has offered a premium of 0.736 against one unit of total risk. It has been found that the share indices of Six
mutual funds- 1st ICB Mutual Fund , 7th ICB Mutual Fund ,AIMS 1st M.F., Grameen M. F. One, Grameen One:
Scheme 2, ICB AMCL and 2nd NRB M F are higher than industry average and that of the remaining 12 mutual funds
are lower than industry average. Besides, the performance in form of Treyner Index has varied @ of 5.212 across
mutual funds understudy. This indicates that most of the funds have performed very poor in the year 2009.
It has been found from the examination of Table 6 during 2010 that the Treyner Index of 3rd ICB Mutual
Fund is the maximum and that of 6th ICB Mutual Fund is the minimum. The industry average Treyner Index is 1.50
which indicates that the investment in mutual fund industry has offered a premium of 1.50 against one unit to total
risk. The mutual fund has performed better in 2010 as compared to 2009. The Treyner Indices of seven mutual
funds-1st ICB, 3rd ICB Mutual Fund, 7th ICB Mutual Fund, AIMS first Guaranteed M.F, Grameen One: Scheme 2,

571

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ICB AMCL 1st M F and ICB AMCL Pension Holders Unit Fund are higher than the industry average , and those
of remaining 11 mutual funds are lower than the industry average. This shows a discouraging performance of most
of the mutual funds under study. Besides, the performance in form of Treyner Index has varied @ of 12.224 across
mutual funds understudy. All these measures on Treyner Index indicate a better performance of mutual fund in the
year 2010 as compared to 2009. This better situation can be attributed to the better performance of stock market in
Bangladesh in the first three quarters of 2010.
It is evident from the analysis of mutual fund performance in 2011 of Table 6 that the industry average
Treyner Index is negative ( -0.642 ). The Treyner Index of Grameen One: Scheme Two is the maximum (+ 0.40)
and that ICB AMCL Pension Holders Unit Fund is the minimum (- 10.456). Again the variation in Treyner Index is
2.474 across mutual funds understudy. The very interesting fact is that only seven funds 1st ICB Mutual Fund, 5th
ICB Mutual Fund, 6th ICB Mutual Fund, 8th ICB Mutual Fund, AIMS first Guaranteed Mutual Fund, Grameen
Mutual Fund One, and Grameen One : Scheme Two have managed positive premium for total risk, and the rest have
experienced negative and very worst performance in the year 2011. This worst performance is truly reflecting the
impact of stock market scam in the year 2011. In this year, the stock market of Bangladesh has experienced an
abnormal loss of market index due to incredible amount of fall of prices of almost all securities. The causes for this
stock market scam are irregular change in laws, manipulation in trading, ill behavior of syndicate, inefficiency of
stock market makers, etc.
The examination of Mutual Fund performance in the 2012 provides an unimpressive performance of funds
in terms of industry average Treyner Index of negative (-0.49) with maximum Sharpe Index of AIMS first
Guaranteed Mutual Fund (+0.03) and minimum Sharpe Index of and ICB AMCL Pension Holders Unit Fund ( 1.21). It is noticeable that most of the funds have negative track of generating Treyner Index ratios except two
funds AIMS first Guaranteed Mutual Fund and Grameen One : Scheme 2 .All though the industry average is
drastically low, however this has shown a recovery of mutual fund industry in Bangladesh. This is due to the
correction of market prices of almost all securities of stock market in Bangladesh in the year 2012.
The Table 6 over the performance of mutual fund in 2013 gives different insight of performances. The
industry average Treyner Index is found to be negative (-0.431) with maximum limit of 3.351 (ICB Unit Fund) and
minimum limit of -5.367 (ICB AMCL Unit Fund). The rate of variation in Treyner Index across mutual funds under
study is found to be 1.535. Almost all mutual funds have earned negative Treyner Index ratio except few mutual
funds such as AIMS first Guaranteed Mutual Fund, Grameen One: Scheme Two and ICB Unit Fund. This implies
that these funds have failed to generate positive rewards for investors. However, most of the mutual funds have
performed better in 2013 than 2012.
FIGURE 5. THE AVERAGE TREYNOR I NDEX OF MUTUAL FUNDS (EXPECTED INDEX)
8.000
6.000
4.000
2.000
ICB Unit Fund

ICB AMCL

ICB AMCL 1st

ICB AMCL Unit

ICB AMCL 1st

ICB AMCL 2nd

ICB AMCL Islamic

Grameen M. F.

8th ICB M. F.

Aims 1st G. M.F.

-8.000

7th ICB M. F.

6th ICB M. F.

5th ICB M. F.

4th ICB M. F.

3rd ICB M. F.

-6.000

1st ICB M. F.

-4.000

2nd ICB M. F.

-2.000

Grameen One :

Expected Index

0.000

Industry Index

Source: Annual Reports of Sample Mutual Funds


Notes: Data have been compiled by the researcher

The overall performance of mutual fund industry in Bangladesh is found most consistent in the year 2010 and most
volatile in the year 2013. The study has ranked all mutual funds understudy on an average Treynor Index Ratio for
the whole study periods. It has been found that mutual funds understudy have been ranked as in order 3rd ICB
Mutual Fund,1st ICB Mutual Fund, ICB AMCL Pension Holders Unit Fund, AIMS first Guaranteed M.F, 7th ICB

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Mutual Fund, Grameen One : Scheme 2,Grameen M. F. One, ICB Unit Fund, ICB AMCL 2nd NRB, etc as is shown
in last column of Table 6
Evaluation of Mutual Fund Performance on Jensen Measure
TABLE 7. MODEL BASED PERFORMANCE OF MUTUAL FUND UNDERSTUDY ON ADJUSTED JENSENS ALPHA
EXPECTED INDEX
Funds under Study
Expected
2009
Rank
2010
Rank
2011 Rank
2012
Rank
2013
Rank
Rank
Index
st
1 ICB M. F.
15.48
I
2.69
V
0.93
VII
0.59
VI
0.37
XI
4.01
I
2nd ICB M. F.

-2.31

XII

-4.00

XV

1.42

III

0.72

III

0.60

IV

-0.71

IVX

3rd ICB M. F.

-9.72

XVIII

14.25

0.91

VIII

0.58

0.54

1.31

VI

4 ICB M. F.

0.70

IV

0.78

VII

0.50

XV

0.34

XIII

0.36

XII

0.54

IX

5th ICB M. F.

0.49

VII

0.73

VIII

0.54

XIII

0.38

XI

0.35

XIII

0.50

th

-4.80

XVI

-62.95

XVIII

1.15

0.57

VII

0.48

VIII

-13.11

XVII

th

7 ICB M. F.

3.47

II

4.30

IV

0.83

0.52

IX

0.41

1.90

IV

8th ICB M. F.

-4.03

XV

-11.17

XVII

1.25

IV

0.65

IV

0.49

VIII

-2.56

XVI

Aims 1 G. M.F.

1.75

III

5.12

III

1.12

XI

0.76

II

0.62

III

1.87

Grameen M. F. One

0.63

0.53

IX

0.64

XIII

0.44

0.48

IX

0.54

IX

Grameen One : Scheme 2

0.58

VI

0.23

0.73

XI

0.56

VIII

0.68

II

0.56

VIII

ICB AMCL Islamic M. F.

-3.70

XIV

-6.61

XVI

0.88

0.34

XII

0.21

XIV

-1.78

XV

-0.80

-1.37

XIII

12.02

IX

0.87

0.51

VI

2.25

III

ICB AMCL 2 NRB M. F.

-0.40

VIII

0.15

XI

0.25

XVI

-0.01

XVI

-0.08

XVIII

-0.02

XII

ICB AMCL Unit Fund

-0.75

IX

-1.16

XIV

2.14

II

0.24

XIV

0.16

XV

0.13

XI

ICB AMCL 1st M. F.


ICB AMCL Pension
Holders U. F.
ICB Unit Fund

-4.97

XVII

0.89

VI

0.51

XIV

0.14

XVI

0.04

XVI

-0.68

XIII

-3.10

XIII

6.94

III

0.24

XVII

-0.04

XVIII

-0.06

XVII

0.80

VII

-0.83

XI

-0.89

XIII

-1.52

XVIII

-5.96

XVIII

25.94

3.35

II

M. F. Industry Average

-0.68

-2.86

1.36

0.09

1.78

-0.06

Maximum Limit

15.48

14.25

12.02

0.87

25.94

4.01

Minimum Limit
Range
(Maximum Minimum)
Standard Deviation

-9.72

-62.95

-1.52

-5.96

-0.08

-13.11

6.84

26.03

1.532

6.034

Coefficient of Variation

16.49

3.38

th

6 ICB M. F.

st

ICB AMCL 1st NRB M. F.


nd

25.21

77.20

5.070

15.92

13.5
5
2.75

-7.404

-5.563

2.02

Source: Annual Reports of Mutual Funds.


Notes: Data have been compiled by the researcher. Calculations have been made on SPSS

From the perusal of Table 7 it has been found that the performances of mutual funds understudy have varied
significantly from year to year, and fund to fund. During the study period of 2009, it has been observed that the
Adjusted Jensens Alpha Expected Index of 1st ICB Mutual Fund is the highest, and that of 3rd ICB Mutual Fund is
the lowest. The average Adjusted Jensens Alpha Expected Index of the mutual fund industry in the year 2009 is 0.68 which implies that the mutual fund industry has offered a premium of -.068 against one unit of total risk. It has
been found that the Adjusted Jensens Alpha Expected indices of eight mutual funds- 1st ICB Mutual Fund , 4th ICB
Mutual Fund,5th ICB Mutual Fund, 7th ICB Mutual Fund ,AIMS first Guaranteed Mutual Fund, Grameen One
Mutual Fund , Grameen One : Scheme 2 , ICB AMCL 2nd NRB Mutual Fund are higher than industry average and
that of the remaining 10 mutual funds are lower than industry average. Besides, the performance in form of
Adjusted Jensens Alpha Expected Index has varied @ of 5.0707 across mutual funds understudy. This indicate that
most of the funds have performed very poor in the year 2009.
It has been found from the examination of performance of mutual funds understudy during 2010 of Table 7
that the Adjusted Jensens Alpha Expected Index of 3rd ICB Mutual Fund is the maximum and that of 6th ICB
Mutual Fund, is the minimum. The industry average Adjusted Jensens Alpha Expected Index is -2.86 which
indicates that the investment in mutual fund industry has offered a premium of -2.8674 against one unit to total risk.

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The mutual fund has performed better in 2009 as compared to 2010. The Adjusted Jensens Alpha Expected Indices
of five mutual funds-2nd ICB, 6th ICB, 8th ICB, ICB AMCL Islamic Mutual Fund are lower than the industry
average, and those of remaining 13 mutual funds are higher than the industry average. This shows a discouraging
performance of most of the mutual funds under study. Besides, the performance in form of Adjusted Jensens
Alpha Expected Index has varied @ of 15.92 across mutual funds understudy. All these measures on Adjusted
Jensens Alpha Expected Index indicate a better performance of mutual fund in the year 2009 as compared to 2010.
This better situation can be attributed to the better performance of stock market in Bangladesh in the first three
quarters of 2010. This worst performance is truly reflecting the impact of stock market scam in the year 2010. In this
year, the stock market of Bangladesh has experienced an abnormal loss of market index due to incredible amount of
fall of prices of almost all securities. The causes for this stock market scam are irregular change in laws,
manipulation in trading, ill behavior of syndicate, inefficiency of stock market makers, etc.
It is evident from the analysis of mutual fund performance in 2011 of Table 7 that the industry average
Adjusted Jensens Alpha Expected Index is 1.36. The Adjusted Jensens Alpha Expected Index of ICB AMCL 1st
NRB Mutual Fund is the maximum (+ 12.2) and that of ICB Unit Fund is the minimum. (- 1.52). Again the variation
in Adjusted Jensens Alpha Expected Index across mutual funds understudy has been at the rate of 1.36. The very
interesting fact is that only ICB Unit Fund have experienced negative premium for total risk and very worst
performance in the year 2011, and the rest have managed positive premium for total risk
From the perusal of Table 7 it has been found that during the study period of 2012, the Adjusted Jensens
Alpha Expected Index of 1st ICB Mutual Fund is the highest, and that of ICB AMCL 1st NRB Mutual Fund is the
maximum (+ 0.87) and that of ICB Unit Fund is the minimum. (- 5.96). The average Adjusted Jensens Alpha
Expected Index of the mutual fund industry in the year 2012 is 0.09 which implies that the mutual fund industry has
offered a premium of.09 against one unit of total risk. Besides, the performance in form of Adjusted Jensens
Alpha Expected Index has varied @ of 1.532 across mutual funds understudy. This indicates that most of the funds
have performed very well in the year 2012.
The Table 7 indicates over performance of mutual fund in 2013 gives different insight of performances.
The industry average Adjusted Jensens Alpha Expected Index is found to be positive (1.78) with maximum limit of
25.9 (ICB Unit Fund) and minimum limit of -0.08 (ICB AMCL 2nd NRB Mutual Fund). The rate of variation in
Adjusted Jensens Alpha Expected Index across mutual funds under study is found to be 6.03. Almost all mutual
funds have earned positive Adjusted Jensens Alpha Expected Index ratio except two mutual funds such as ICB
AMCL 2nd NRB Mutual Fund and ICB Unit Fund. This implies that these funds have generated positive rewards
for investors. However, most of the mutual funds have performed better in 2013 than 2012.
FIGURE 6. THE AVERAGE ADJUSTED JENSENS ALPHA EXPECTED INDEX OF MUTUAL
FUNDS (EXPECTED INDEX)
5.00
0.00
-5.00
-10.00
-15.00

Source: Annual Reports of Sample Mutual Funds


Notes: Data have been compiled by the researcher
The overall performance of mutual fund industry in Bangladesh is found most consistent in the year 2009 & 2010
and most volatile in the year 2013. The study has ranked all mutual funds understudy on an average Adjusted
Jensens Alpha Expected Index of Mutual Funds (Expected Index) for the Year 2009 to 2013 Ratio for the whole
study periods. It has been found that mutual funds understudy have been ranked as in order 1st ICB Mutual Fund,
ICB Unit Fund, ICB AMCL 1st NRB Unit Fund, 7th ICB Mutual Fund, AIMS first Guaranteed M.F, 3rd ICB Mutual

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Fund, ICB AMCL Pension Holders Unit Fund, Grameen One : Scheme 2,Grameen M. F. One, 5th ICB Mutual
Fund, ICB AMCL Unit Fund, etc as is shown in Table 7 Column.
SUMMARY OF THE FINDINGS
The study has evaluated mutual fund performance on the basis of Characteristic Measures and Fund Performance
Evaluation Models. The findings of the study have been summarized as follows:
a) The study has found that the average total return of the mutual fund industry is 31.33%. Most of the sample
funds have failed to produce return equal to or more than industry average and only five sample mutual
funds such as 2nd ICB mutual fund, 3rd ICB mutual fund, 4th ICB mutual fund, Grameen mutual fund One,
and Grameen mutual fund One: Scheme- Two have produced total return more that industry average of
total return. This implies that only a few numbers of mutual funds are dominating the mutual fund industry
and the maximum numbers of sample mutual funds are found to be underperformed.

b) The study has found the average expected Internal Rate of Return (IRR) of the mutual fund industry is

37.37% that the total return of only five mutual funds such as 2nd ICB mutual fund, 3rd ICB mutual fund,
AIMS first guaranteed mutual fund, Grameen mutual fund One, and Grameen mutual fund One : Scheme 2
is higher than industry average of total return, and that of remaining 13 mutual funds understudy is lower
than the industry average of total return . The industries averages of total internal rate of return for five
years from 2009-2013 are 49.47%, 116.39%, 15.92%,-7.53%, and 12.60% respectively. This scenario of
mutual fund performance is truly reflecting real scenario of the stock market in Bangladesh during the
study periods. It has been found that most of the sample funds have failed to produce return equal to or
more than industry average.

c) It has been found that the average differential return of the mutual fund industry is 1.81%. The study has

found that the total differential return of only nine mutual funds such as 1st ICB mutual fund, 4th ICB
mutual fund, 5th ICB mutual fund, AIMS 1ST Guaranteed mutual fund, Grameen mutual fund One, and
Grameen mutual fund One : Scheme 2 , ICB AMCL 2nd NRB Mutual Fund, ICB AMCL 1st Mutual Fund
and ICB AMCL Pension Holders Unit Fund is higher than industry average of total differential return, and
that of remaining 9 mutual funds understudy is lower than the industry average of total differential return.
This implies that a 50% of mutual funds are performing better in the mutual fund industry. The industries
averages of total differential return for five years from 2009-2013 are 23.70%, 25.86%, -24.61%, -17.71%
and -5.92% respectively. This implies that 50% mutual funds are dominating the mutual fund industry and
the 50% of sample mutual funds are found to be underperformed.

d) On Jensen Model Variance Between excess of portfolio return over risk free rate and expected excess
market return ,fund management performance can be judged on whether a fund is able to generate
abnormal return or not. The study has found least number of sample funds have performed over across
study periods. The study has found on industry average that AIMS first Guaranteed Mutual Fund, Grameen
Mutual Fund One, Grameen One: Scheme Two, and ICB AMCL 2nd NRB Mutual Fund have been found
to have generated abnormal returns over the study periods and others, generated normal return. This
indicates that the former funds have performed better than market and the latter have performed under. In a
nutshell, it can be said that the mutual fund industry could not outperform the market during the study
periods.

e) On Sharpe Index, The average Sharpe Index of the mutual fund industry in the year 2009 is 1.808 which
implies that the mutual fund industry has offered a premium of 1.808 against one unit of total risk. All
these measures on Sharpe Index indicate a better performance of mutual fund in the year 2010 as compared
to 2009. This better situation can be attributed to the better performance of stock market in Bangladesh in
the first three quarters of 2010. In 2011 industry average is negative (-0.04). The very interesting fact is that
only eight funds : 1st ICB Mutual Fund, 5th ICB Mutual Fund,6th ICB Mutual Fund, 8th ICB Mutual
Fund, , AIMS 1ST M.F, GRAM 1, GRAM Fund 2 and ICB unit Fund have managed positive premium
for total risk, and the rest have experienced negative and very worst performance in the year 2011. In this
year, the stock market of Bangladesh has experienced an abnormal loss of market index due to incredible
amount of fall of prices of almost all securities. The causes for this stock market scam are irregular change
in laws, manipulation in trading, ill behavior of syndicate, inefficiency of stock market makers. The

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(in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA)
ISBN 978-0-9925622-4-3

examination of Mutual Fund performance in the 2012 provides an unimpressive performance of funds in
terms of industry average (-0.49) .It is noticeable that most of the funds have negative track of generating
Sharpe Index ratios except two funds AIMS first Guaranteed Mutual Fund and Grameen One : Scheme
Two. All though the industry average is drastically low, however this has shown a recovery of mutual fund
industry in Bangladesh. This is due to the correction of market prices of almost all securities of stock
market in Bangladesh in the year 2012. In 2013 gives different insight of performances. The industry
average Sharpe Index is found to be negative (-0.03) with maximum limit of 0.85 (Grameen One: Scheme
2) and minimum limit of -0.72 (ICB AMCL 1st Mutual Fund). The rate of variation in Sharpe Index across
mutual funds under study is found to be 0.45. Almost all mutual funds have earned negative Sharpe Index
ratio except few mutual funds such as 2nd ,3rd,4th,5th, 6th ICB Mutual Fund and AIMS 1st Mutual Fund,
Grameen Mutual Fund One , Grameen One : Scheme 2 . This implies that these funds have failed to
generate positive rewards for investors. However, most of the mutual funds have performed better in 2013
than 2012.

f) On Treynor Index the mutual fund industries averages of total return for five years from 2009-2013 are
.736, 1.5,-0.642,-0.431,and-0.21 respectively. In the year 2009 industry has offered a premium of 0.736
against one unit of total risk. In 2010 the industry average indicates that the investment in mutual fund
industry has offered a premium of 1.50 against one unit to total risk. In 2011 the industry average Treyner
Index is negative (-0.642). In this year, the stock market of Bangladesh has experienced an abnormal loss
of market index due to incredible amount of fall of prices of almost all securities. The causes for this stock
market scam are irregular change in laws, manipulation in trading, ill behavior of syndicate, inefficiency of
stock market makers, etc. In the year 2012 provides an unimpressive performance of funds in terms of
industry average .The performance of mutual fund in 2013 gives different insight of performances. The rate
of variation in Treyner Index across mutual funds under study is found to be 1.535. Almost all mutual
funds have earned negative Treyner Index ratio except few mutual funds such as AIMS first Guaranteed
Mutual Fund, Grameen One: Scheme Two and ICB Unit Fund. This implies that these funds have failed to
generate positive rewards for investors. However, most of the mutual funds have performed better in 2013
than 2012.

g) Adjusted Jensens Alpha Expected Index of the mutual fund industry averages of total return for five years
from 2009-2013 are -0.68,-2.86,1.36,0.09 and1.78 respectively. This shows a discouraging performance of
most of the mutual funds under study. Besides, the performance in 2010 form of Adjusted Jensens Alpha
Expected Index has varied @ of 15.92 across mutual funds understudy. The rate of variation in Adjusted
Jensens Alpha Expected Index across mutual funds under study is found to be 6.03. Almost all mutual
funds have earned positive Adjusted Jensens Alpha Expected Index ratio except two mutual funds such as
ICB AMCL 2nd NRB Mutual Fund and ICB Unit Fund. This implies that these funds have generated
positive rewards for investors. However, most of the mutual funds have performed better in 2013 than
2012.
POLICY IMPLICATION
The study has found asymmetric performance of sample mutual funds across study periods with regard to return and
index parameters for judging the performance as are evident from the summary of the findings. On the basis of
these, the study has suggested following operating and pragmatic policy measures with a view to enhance
performance of mutual fund industry in Bangladesh:
a)

The operating fees to the Asset Management Companies (AMCs) are not subject to their performance. So,
Bangladesh Security and Exchange Commission (BSEC) should take necessary step to link the operating
charge of AMCs to the level of performance;

b) AMCs can pursue following courses of action while selecting security for buying or selling security:
i.
To select security on the basis of factors of fundamentally best script such as value, earnings, growth,
and growth at reasonable price.
ii. To select security in line with the basic guideline say for example, zero investment in Z category share,
iii. To diversify investment in shares of all potentially important sectors of stock market, and
iv. To be proactive to the change in laws, price volatility, and speculative behavior of market participants.

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c)

Board of Trustee should keep on monitoring the performance of AMCs through on site and off site
inspection and review continuously.

CONCLUSIONS
The growth of investments in mutual funds around the world has widely increased during the past few decades,
leading to fierce competition in the industry. Investors now have a wide range of products to choose from, which
makes their investment decision more complicated than before. The present study has found phenomenal growth
mutual fund industry with respect to numbers and volume. But the performance of mutual funds is not satisfactory.
In order to increase the performance of mutual funds and make the mutual fund industry more vibrant the present
study has suggested some prudent strategic measures for Asset Management Companies.
From the above analysis, it can be noted that the growth oriented mutual funds have not performed better
than their respect to volatility most of the funds have not performed better. Growth oriented mutual funds are
expected to offer the advantages of diversification, market timing and selectivity. Finally, in its practical aspects,
this study will, it is hoped, be useful for individuals and institutional investors in selecting mutual funds. It also
helps fund managers to identify their positions and gives ideas on the strategies which they should follow in order to
maximize returns for their investors.
ENDNOTES
* Acknowledgement
I would to thank Professor Dr. Mohammed Saleh Jahur and Professor Sarwar Jahan for their continuous concern and
suggestions throughout this paper. I am also grateful to the anonymous referee for the helpful remarks. The
remaining errors are my own.
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