Assessing the Factors Effecting Open Ended Mutual Fund Performance in Pakistan

Abstract

A mutual fund is a solid investment choice for new investors who may lack the experience and knowledge needed. The main goal of this study was to identify factors that affect the performance of mutual funds in Pakistan. It looked at 100 open-ended mutual funds from 2020 to 2024. The data came from annual reports of mutual funds and the Mutual Fund Association of Pakistan. Researchers analyzed this data using Random Effects Ordinary Least Squares with Fixed Effects. They found that larger mutual funds generally perform better than smaller ones. When liquidity increases, mutual funds tend to excel. Interest rates greatly influence fund performance; therefore, a large cash reserve might lead to lower investment returns. A fund's returns improve when its management invests more of its assets. Better cash inflows also help funds perform better. These funds can gain additional returns through careful management of international investments. However, management fees can reduce a fund's returns. Load fees can also lower the mutual fund's returns. Management fees cut into overall returns, which can deter investors. Research indicates that fund managers should be aware of all elements influencing returns. This knowledge would benefit both mutual fund managers and investors.