The Impact Of Funds And Fund Family Characteristics On Fund Performance: Evidence From Malaysia

Islamic mutual funds (IMFs) have been growing as an alternative investment vehicle for investors who want to combine value and financial objectives in their investment. A group of funds is managed by an investment company called a family of funds, and different fund families follow different strategies that distinguish them from each other. In addition to this, characteristics of fund families influence the performance of fund families. This study investigates the extent to which fund families and fund characteristics contribute to explaining fund returns differentiated by managers’ stock selection and market timing abilities in Malaysia for the period 2009 to 2016. In the first step, the study used Jensen’s (1968) model to calculate the fund performance, and the Henriksson and Merton model (1981) and Treynor and Mazuy (1966) to separate the performance into a market timing and fund selection. In the second step, using the coefficient estimates of fund selection and timing measures as dependent variables, the study tested the extent to which fund family and fund characteristics are associated with selectivity and timing performance measures. The results show the managers of IMFs have poor selectivity skills and good market timing ability. The results also show that fund family characteristics have a significant impact on the performance of Islamic funds' in Malaysia whether using the Treynor and Mazuy (T&M) or the Henrikson and Merton (H&M) model.