The Performance of Mutual Funds as Key Financial Institutions in the Stock Market: The Case of the Egyptian Mutual Funds

Abstract This paper examines the risk-adjusted returns using Sharpe's index, Treynor's index, and Jensen's Alpha for mutual funds operating in the Egyptian financial market in the period 1999- 2003 (19 Mutual Funds). The benchmark for comparison was the CASE 30 index. The paper examines next, the determinants of mutual fund performance. The results show that 11 mutual funds under Sharpe's index outperformed the Egyptian market while 9 mutual funds under Treynor's index outperformed the market and only 8 mutual funds under Jensen's Alpha outperformed the Egyptian market index. The results regarding the determinants examined (Fund age, size, objective, total risk, systematic risk, expenses ratio, type and fund manager gender) show consistent relation between fund's expenses ration, objective, type, total risk and fund's manager gender, and fund performance. While no consistent relation found between fund's age, size and systematic risk, and the fund performance. For the common investor who wanted to invest in Egyptian Mutual Funds during the period 1999-2003, the selection criteria that will had provided the best results in selecting the fund were: an open end fund, with a growth objective, low expenses ratio and managed by a woman. In contrast the traditional selection criteria of age of the fund and its size in my analysis resulted statistically irrelevant.