“Factors Influencing the Performance of Mutual Funds: Evidence from a developing economy- Bangladesh.”

Abstract

This study assesses the key factors influencing closed-end mutual fund performance in Bangladesh, paying particular attention to the consequences of investing non listed securities. Although the goal of mutual funds is to provide small and risk-averse investors with professionally managed, diversified investment options. This study shows that not all of the investing techniques used by mutual funds accomplish this goal. This study investigates how macroeconomic and firm-specific factors interplay to affect mutual fund performance. The study's sample size is based on ten closed-end mutual funds held between 2013 and 2023. In order to draw conclusions, a sample of closed-end mutual fund lists was chosen for descriptive and causal-comparative research. The effects of firm-specific factors such as fund growth, non-listed securities investments, and the P/E ratio have been assessed. Economic growth and the GDP deflator are macroeconomic factors. The study's independent variables include fund growth, non-listed securities investments, the P/E ratio, economic growth, and the GDP deflator. The dependent variable is the mutual fund performance. Regression analysis in this study was conducted using the random effect model in STATA-15. This study demonstrates that the financial performance of mutual funds has been significantly boosted by both fund growth and economic growth. In Bangladesh, however, the financial performance of mutual funds is significantly impacted negatively by GDP Deflator, the P/E ratio, and investments in non-listed securities. Non-listed securities' detrimental influence is especially alarming. These investments, which frequently lack transparency and regulatory monitoring, put mutual funds at higher risk and undermine the very advantages they are meant to provide to novice or small-scale investors. This result calls into question the widely held belief that more risk in these products always translates into higher profits. It is obvious that asset allocations strategies need to be reevaluated, especially with regard to non-listed securities, and that stricter screening and due diligence procedures need to be implemented. Investor protection and transparency could be improved by extending regulatory coverage and bolstering oversight of non-listed companies. For investors, asset managers, and legislators navigating Bangladesh's changing mutual fund market, this report offers insightful information. It acts as a warning as well as a guide, pointing out areas that require strategic realignment in order to boost performance, rebuild confidence, and guarantee the mutual funds' long-term survival as inclusive investment vehicles.