Recently concluded 2012 Global Finance Conference in Chicago, the USA had a Saudi Arabian participant researcher Dr. Dawood Ashraf, an Assistant Professor in Prince Mohammad Bin Fahd University (PMU).
“The economic downturn caused due to excess of leverage in the financial system hardly impacts Islamic Mutual Funds (IMF),” said the PMU researcher after analyzing relative performance of IMFs with the conventional funds in Saudi Arabia that constitutes for more than 20% of world’s Islamic capital market.
Despite the biggest in term of market capitalization amongst the GCC countries, there is still little research on Saudi capital markets and especially performance of Saudi Arabian mutual funds,” he said.
Conference participants lauded this professor’s research which deals with mutual funds in Saudi Arabia. It entitled “Performance evaluation of IMFs relative to conventional funds: Empirical evidence from Saudi Arabia.” It highlighted existing trends besides imploring future roles in the context of Saudi Arabian capital markets by review of previous researches on IMF performances.
He said that “role of IMFs and conventional funds must be understood in the context of global economic crisis. This research explores relative performance of Islamic and conventional mutual funds to draw conclusion about reasons of underperformance or over performance due to limited diversification or missing investment opportunities.
“Certain attributes make IMFs commendable so they outshine in the long run,” explains this researcher and argues that outperformance is possible through investor commitment for long term investment and with least market volatility. Other factor is lower cash outflows from IMFs due to investors’ commitment to the cause and lower leverage in the portfolios complying with Islamic Shari’ah principles while there is downturn in the global economy.
“IMF is a hedge against the adverse economic conditions. Investors, regardless of ethical or religious orientation may enjoy benefit of hedging through holding proportion of investment portfolio in IMFs,” says this researcher.
The conference raised question on the “wrongs with the world economies” in the current scenario. The European crisis, financial crisis, future of globalization & capitalism et al were debated so were the role of Islamic mutual funds.
Participants from the USA, the UK, Germany and rest nations discussed global economic crisis but PMU researcher explained robust Saudi Arabian economy. He described uniqueness of Islamic mutual funds that keeps it apart.
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