Assessment of Mutual Funds Performance: A Study of Selected Diversified Equity Fund in Tanzania

Abstract

Mutual fund is a trust which pooling up the recourses of investors who have an ambition of investing in the free risk investment. The resources that collected are directed to capital market instruments. The income earned from the money investments and the capital invested is appreciation and realized by its unit holders in proportion to the number of units owned by investors. Thus, a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. UTT was established under the Trustee Incorporation Act, Cap 318 in 2005 and was vested with the several key activities including the development of collective investment schemes; acquiring and keeping in trust the shares of privatized enterprises and encouraging savings culture through wide participation in the ownership of distributed shares/units. Among wide variety of funds equity diversified fund is considered as substitute for direct stock market investment. In this research paper an attempt is made to analyze the performance of the growth oriented equity diversified schemes on the basis of return and risk evaluation. The analysis was achieved by assessing various financial tests like Average Return, Sharpe Ratio, Treynor Ratio, Standard Deviation, Beta and Coefficient of Determination (R2). The data has been taken from various websites of mutual fund schemes. The analysis portrays that majority of funds selected for study have outperformed under Sharpe Ratio as well as Treynor Ratio.