Performance Analysis of Mutual Funds in Saudi Arabia

Abstract

When it comes to investing in mutual funds in the Kingdom, the Saudi investors have to choose from 182 different funds currently offered by the eleven fund managers. In the case of Saudi Arabia, the fund managers/asset management companies are the different banks listed on Saudi Arabia's Stock Exchange - Tadawul. The complexity of choosing funds is further compounded by the different currencies in which the funds are denominated (6), categories (11), subcategories (2), classifications (4); due to which the common investors are often confused about which fund they should invest in, as they are not able to assess the risk-return profile associated with each of the funds.

The purpose of the article is to illustrate a simple method to analyse performance and develop a good understanding of the risk-return associated with the mutual funds in Saudi Arabia. The article presents an overview of Mutual Funds in Saudi Arabia and their performance analysis during the last six months (1st January to 15th of June, 2006), the period in which the stock market had been very volatile.

An overview of the Saudi Arabia Mutual Fund Industry is presented in terms of each of the five variables chosen for the study: 1. Mutual fund managers; 2. Base Currency; 3. Category; 4. Subcategory; 5. Classification. Further, the 182 funds were classified in to positive and negative return funds for the chosen period and were probed for what type of funds (currency, category, subcategory and classification wise) have yielded positive and negative returns.

The performance of the positive and negative return funds in terms of each of the five chosen variables and a combination of classification variable with the other three variables, i.e., category, subcategory and currency was also presented.

Finally, the performance of the funds and the Fund Managers have been evaluated in terms of the variables based on average risk per return and the results have been presented.

Keywords: Mutual funds, Risk, Return, Growth, Balanced, Currency, Shariah,Non-Shariah, Fund Manager