Analyzing Balanced, Debt and Liquid Funds: A Case-Study of Mutual Funds in Saudi Arabia
16 Pages Posted: 21 Dec 2006
Date Written: December 21, 2006
In Saudi Arabia, besides 100 equity funds, there are 9 categories of other funds and these are invested in Bonds, Money Market and Trade Finance instruments, Balanced Funds of both the local and international variants offering different levels of return and risk. The purpose of this article is to present a systematic analysis of the performance of these funds.
Performance of funds were evaluated in terms of (1) Performance of the fund for the current Year (YTD) (2) Fund return over past 6-month, 1- and 3-year period computed using Net Asset Value (NAV), Return per unit Risk and Sharpe ratio.
The important observation that emerged from the analysis was that the 9 categories of funds performed relatively better on a longer time frame of 3- years, which gives enough time to a Fund Manager to tide over the difficult times of the stock markets.
A comparison of the international and local variants of the funds on the basis of risk per unit return and Sharpe ratio led to the following conclusions:
International Money Market Funds have higher average risk per unit return than that of local Money Market Funds. Both the international and local trade funds yielded negative risk adjusted returns (Sharpe ratio) but local Trade Funds have performed relatively better than international Trade Funds. International Balanced Funds performed better than local Balanced Funds in terms of risk-adjusted return (Sharpe ratio).
Keywords: Funds, Risk, Return, YTD, Sharpe ratio, Balanced, Bonds, Trade Finance, Money Market
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