Financial Performance Analysis of Mutual Funds in Nepal

Abstract

Financial System comprises financial institutions, services, financial instruments and their applications. Mutual funds are one of the componenta of financial sysetm of nation. The project aims at finding out financial performance of mutual funds in Nepalese financial market. The study aims at analyzing the performance of closed ended mutual fund schemes in Nepal, which are primarily equity based. The study is based on the sample of four mutual fund schemes out of 11 mutual funds using descriptive and analytical research design. Simple random sampling method has been used for selecting four samples. Results are obtained through use of widely used risk-adjusted measures: Sharpe Measure, Treynor measure and Jensen Measure. Secondary data are backbone of the study. According to the result, two mutual funds (SEOS and NMBSF) performed better as per Sharpe Measure. Three mutual fund schemes(SEOS, NIBLSF and NMBSF) outperformed the market on the basis of Treynor index. Likewise two schemes (SEOS and NMBSF) outperformed as per Jensen index. One scheme (LVF) has under performed as per all the three measures. Common stocks and bank deposits are the two key source of investment that the funds have invested their funds. Bank deposit is another source of their investment. About more than half of their fund is invested in common stocks and bank deposit. SEOS has highest expense ratio among all. NEPSE return is taken as benchmark return in order to make comparison. There exist negative correlation between return of Laxmi Value Fund and markeet return. On the other hand, high degree of positive correlation between returns of NIBL Samriddi Fund and NMB Sulav Fund and that of market.

Key words: Mutual fund, Net asset value, Nepal stock Exchange, Sharpe, Treynor, Jensen