The Determinants Of Islamic Mutual Fund Flows: Evidence From Malaysia

Islamic mutual funds (IMF) are growing as a substitutional investment vehicle for investors who want to combine value and financial objectives in their investment. A group of the funds is managed by one Investment Company called the family of funds, different families follow different strategies that distinguish them from each other. This study investigates the flow-performance relationship in IMF, in addition to the extent to which family and fund characteristics contribute to explaining fund flows in Malaysia for the period from 2009 to 2017. The study uses raw returns to calculate the fund performance and use the percentage money flow (FLOW), defined as money flow scaled by the total net asset of the fund. The study use panel regression models to estimate the relationship between fund flow and performance, fund, and family variables. The results show there are positive relationship between past performance and fund flow that mean IMF investors make rational financial decisions by directing fund flows to better performing funds. The results also indicate there are negative relationship between fund flows and fund risk may be due to IMF performing better during the bearish market since the risk is high. Finally, the results indicate there are negative relationship between fund flows and fund size, family size, number of funds in the family, this may be because when family or fund become larger and included more funds can’t preserve the same high growth rate.