The Determinants of Mutual Fund Growth in Pakistan

Mutual Fund industry plays a pivotal role in optimal allocation and channelization of available idle resources in the economy. This role becomes much stronger in the developing economies like Pakistan where the prospective investors do not have much investment knowledge, information, and facilities to invest in the capital markets neither they have risk aptitude for direct investments in risky stocks. The present study is pioneer in its nature to investigate the role of various factors in determining the mutual funds growth in Pakistan. The panel data for the period of 2005-2009 has been used for 13 family equity mutual funds and fixed effect and random effect models have been applied for estimation of determinants of mutual funds growth in Pakistan. The results have reported that assets turnover, family proportion, and expense ratio are positively leading the growth of mutual funds, in contrast with management fee and risk adjusted returns which are negatively associated with mutual funds growth.