Evaluation Of Mutual Fund Performance In Developing Markets

Mutual fund is one of the fast growing financial investment instrument in the current financial market.The levels of growth of investment in mutual fund have been very encouraging and tremendous over the past years.The present study is to do evaluation of mutual fund riskadjusted performance in developing markets,using Ghana as a case.Mutual funds listed on the Ghana Stock Exchange is in a total of ten and all the listed mutual funds was used as the sample size of this study and all the performance indicators used are matched with the relative benchmarks of the GSE-CI which covers the periods from 2010-2015.The use of classical models and techniques for performance measurement was adopted for this study for both regression and non-regression measures.In addition,the study included an extended model by adopting the use of Fast Adaptive Neural Network Classifier(FANNC)and Backpropagation Neural Network(BPNN)to evaluate mutual fund performance in terms of it flexibility and responsiveness,and it was compared to the three classical models which are Sharpe,Treynor and Jensen Alpha to see which of the models can best measure performance in the stock market.Both past and present literatures for performance measurement are used to enable the study fill in the expected gab between various empirical findings.Specifically,the study looks at the following as a way to measure the mutual fund performance in a developing market like Ghana with the use of an audited published financial statement and Bank of Ghana Benchmark Composite Index.The study thus examine the average returns performance of the mutual fund relative to its benchmark,analyze the rewards for volatility and variability provided by the mutual funds,examines how the mutual fund performance can be explained by any of its characteristics,evaluate mutual fund performance base on its flexibility and responsiveness,and investigate the policy implications of the various mutual funds investment in Ghana which encourages retirement and long-term savings.Firstly,the study found that,in all the total performance of the mutual funds transversely with the classical models thus,Jensen,Treynor and Sharpe was good within the study period.The results indicate that,the funds recorded high returns with a very resilient correlation coefficients between the raw returns and the total risk.Again,it was found that,the Sharpe index in respect of average returns outpaced the benchmark index which can then be concluded that the mutual fund is extremely expanded considering it adjusted R-Square.With regards to Jensen alpha,mutual funds recorded a positive with less average alpha.Furthermore,with all the three classical models for performance evaluation of the mutual fund,the money market funds has a larger performance than the balance fund and equity fund.The study also did an evaluation on mutual fund performance in developing economies base on it flexibility and responsiveness using Fast Adaptive Neural Network Classifier(FANNC).It was reveal that,FANNC requires lesser time in evaluating mutual performance and has superiority in terms of Root Mean Square(RMS)records since it can predict stock market faster and better than the other models.It was found that,stock market predictions can be done perfectly with the use of Fast Adaptive Neural Network as a performance measure.In addition,the algorithm nature of FANNC guarantees fast processing time and it makes it easier to connect financial data in getting the needed results in less time and gives accuracy.In view of the mutual fund characteristics and how it affect fund performance,it was reveal that,specific indicators that expressively impact on mutual fund performance are the Price Earnings(PE),Expense ratio(ER),Cash-to-book value(CB),and the number of funds under management.In effect,when the PE and CB of the fund's investment is high,the more likely to be the greater prospect of surplus returns,with all things being equal.It was also found among others in the study that,the impacts of fund's agility is caused by market capitalization which reliably relates to the fund's investment portfolio.Finally,tax plays a major role in mutual fund performance with respect to investment opportunities for retirement and long-term savings.The study found that,mutual funds which are held entirely by the retirement account holders turn out to be the most less-efficient in terms of taxes than the other types of funds which are assumingly held by some taxable investors.It is therefore important to note that,mutual fund managers takes into consideration their tax bearings of their decisions which they have a minimum aspect of demarcated contribution plan shareholders because when tax efficiency of a mutual fund stand still,it may constrain the fund managers' investment strategies which may results in a smaller or minimum returns for tax efficient funds.