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Modern Thinkers Group Name Roll No Comparing Two Mutual Funds
Modern Thinkers Group Name Roll No Comparing Two Mutual Funds
Need:
Funds to be compared:
Objective of Funds:
2.4%
3.1% 2.6%
2.85% 4.42%
7.79% 16.9%
6.32%
5.83% 52.8%
54.7% 5.6%
4.9%
18.09%
8.5%
Analysis:
FAAF is two years mature than MCB shows that the funds generate less returns
DAF, as age of FAAF is more it is than the beta of both funds predicted. Here
deemed that efficiency more the alpha(-0.01%) of MCB DAF indicate that
therefore. Returns also supposed to the fund has underperformed by 0.01% and
increase resulting in a positive FAAF underperformed by 0.025%, which
relationship. shows portfolio manager of MCB DAF add
FAAF is listed in KSE and MCB DAF is more value to his fund return than FAAF
listed in LSE, KSE is high capitalized because its alpha is more near to zero.
market and more credible than LSE.
Beta: In this comparison beta of both funds
Management fee for running the
is less than 1 indicating that the funds are
business of FAAF is double than MCB
less volatile than market. Beta of FAAF
DAF that is cause of reducing profit,
shows if market bullish or bearish by 100%
as the load charged for transaction
FAAF will move 93.09% as well as MCB DAF
of both funds is same.
will move 48% accordingly. But in this
Dealing days for both funds are
comparison FAAF is highly correlated with
Monday-Friday but the dealing time
market as compared to MCB DAF.
for FAAF is half an hour more than
MCB DAF. Sharpe Measure: In this comparison we
Credit rating of MCB DAF is AM2- analyze that MCB DAF observed return is
(AM TWO MINUS) is by PACRA less than risk free return that’s why the
which is more credible than JCR,VIS. Sharpe ratio is negative. As the FAAF Sharpe
ratio indicates 0.4973 risk premium of per
Funds Facts Analysis:
one percent (1%) of standard deviation.
NAV & Net Assets: Here NAV/Unit of MCB Here the performance of FAAF is more
DAF is 18.5% more than FAAF but as we see better than MCB DAF.
the net assets of MCB DAF these are 54.38%
Standard Deviation: Here the return range
more than FAAF. Here NAV/Unit shows
of FAAF and MCB DAF is (3.329%-4.551%) &
MCB DAF have more assets and less
(1.14%-2.86%) showing MCB DAF is more
liabilities than FAAF.
riskier.
Risk Quant’s Analysis:
Funds Performance Analysis:
Alpha:
FAAF month-month return is near to double
In this comparison alpha of both funds is (- than MCB DAF but the annual return of
ve). This negative alpha FAAF is less than MCB DAF near to 2%. The
return of MCB DAF since inception is
(-13.6%).
Conclusion & Decision:
After analyzing the detail information, Management gives more time to their
Funds risks and returns we think units of customer so that their customers retention,
Faysal Asset Allocation Fund offered by satisfaction and loyalty is high.
Faysal Bank are best suitable to secure our
The major reason for purchasing the units
need. We decide to purchase the units of
of FAAF is its Sharpe Ratio showing that as
FAAF under such grounds.
the fund bear 1% risk it gives 0.4973 return
FAAF management is able to face the for-as-much the MCB DAF gives loss as it
critical situation because of their bear risk. The return range of FAAF is also
experience, FAAF is listed in high capitalized greater than MCB DAF and is less riskier
market so its liquidity is high. because it invest in more secured securities
like Govt. Sec and Oil & Gas. Cumulative
return since inception of MCB DAF is
negative, its being better but currently is
unable to fulfill our need.