FUND CHARACTERISTICS AND FUND PERFORMANCE:Evidence of Malaysian Mutual Funds

Abstract

This paper examines the fund characteristics that affect fund performance by studying 69 Malaysian equity mutual funds representing 44 conventional funds and 25 Islamic funds over the period of five years. The characteristics examined include Risk, Fund Size, Management Expense Ratio, Turnover Ratio and Fund Age. The hypotheses were tested using several regression analyses to see whether Risk, Fund Size, Management Expense Ratio, Turnover Ratio and Fund Age have significant relationships with Fund Performance. The results show that higher risk fund provides higher return. Those funds which spent more on research expenses give superior return compared to those that spent less. The findings also show that young funds performed better than old ones. However, Fund Size and Turnover Ratios were found to have no significant relationship with Fund Performance. Overall, the results indicate that investors should focus on young funds and select fund based on his/her preferred risk level. Fund managers should understand the characteristics that will affect fund performance and develop strategies on how to increase their funds performance.

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