Abstract:
This paper looks at the performance of Bangladeshi Mutual Funds over the last five and ten year periods using
Traditional measures, M 2 measure, and Quadratic Model analysis. Month-end closing price and dividend data have been collected for two selected periods (2000-09) for 10 funds and (2005-09) for 12 funds to compute and compare the performance of the Mutual Funds with that of the DGEN index. The study reveals that almost all of the selected
Mutual Funds were performing better where market timing skills were absent for all of the funds.
Key words: Mutual Fund performance; Sharpe, Jensen and Treynor measures of portfolio performance; M 2 measure and Quadratic Model analysis; Market timing skills.

Mutual Funds are now perhaps the most widely known investment schemes around the world. It is of enormous interest not only to researchers but also to investors who are seeking to have a portfolio of securities but face the lack of time or the expertise to manage that. It is relatively an inexpensive way for them to get a full-time manager to make and monitor their investments. But, despite the tremendous interest in Mutual Funds worldwide, from the very beginning, it failed to catch the fancy of Bangladeshi investors. In Bangladesh, for a long time a government backed organization: Investment Corporation of
Bangladesh (ICB) was the only player in this game. But, the growth in Mutual Funds and their assets has been one of the important stories in recent years. And it has been able to attract a good number of investors with a substantial amount of investment. There have been many new Mutual Funds whose formalities with the regulators have already been finished, and many others whose proposals are on the board positively. This is essentially a strong signal for the development of an organic capital market, offering a safe alternative investment avenue for the investors that really can reduce the excessive and aggressive dependence on equity stocks.
Many investors debate whether or not the professionals are better than you or I at picking stocks.
Moreover, with several market entrants the question arises regarding the choice of Mutual Funds. In fact, investors need to pay careful attention in choosing to invest through Mutual Funds. So, it is becoming an important issue to investors to evaluate the performance of Mutual Funds in Bangladesh. In this paper we would look at the performance of Mutual Funds in Bangladesh over the last five year and last ten year period using different well known performance measures.
The remaining of the paper is organized as follows: section 2 reviews the literature of Performance
Measures, addressing both classic and new measures; section 3 presents a summary of status of Mutual

Funds in Bangladesh. Section 4 presents the models used for evaluating the performance of Mutual
Funds. Section 5 outlines the methodological issues relevant to the theme of the study. Section 6 states the limitation of the study whereas current status of Mutual Fund in Bangladesh is outlined in section 7.
Section 8 & 9 speak about the models of performance measurements and the methodology of the study respectively. Data and the empirical results are presented in section 10 and 11. Concluding remarks are provided in Section 12.
Literature on Mutual Funds performance evaluation is enormous. Many researchers have attempted to assess Mutual Funds’ performances over time. Three of the earliest performance measures, still in use today, are the Treynor index (Treynor 1965) of the excess return per unit of the systematic risk, the
Sharpe index (Sharpe 1966) of the excess return per unit of the total risk, and the Jensen’s α (Jensen
1968), which is defined as the difference between the actual portfolio return and the estimated benchmark return. Since these pioneer works, numerous studies have been concerned with measuring performance in two dimensions (i.e., risk and return) by relying on the Capital Asset Pricing Model (CAPM). The results of these studies depend, to a large extent, on the benchmark portfolio used, the measurement of the risk, and the main criticism made on the use of CAPM is the validity of its underlying assumptions. A few research studies that have influenced the preparation of this paper substantially are discussed in this section.
Sipra (2006) in his paper looks at the performance of Pakistani Mutual Funds over the 2000-2004 and
1995-2004 year periods. He used Sharpe, Jensen and Treynor measures of portfolio performance analysis where the performance is compared to that of the market portfolio defined as the KSE 100 index. Using the Sharpe measure the performance of virtually all the funds was found to be inferior to that of the

market portfolio. The Jensen and Treynor measures showed about half the funds to be outperforming the market portfolio over the 2000-04 years, but when the risk measure was corrected using Fama’s net selectivity measure the market portfolio outperformed all the funds except one.
Kenourgios and Petropoulos (2005) examine the past performances of Mutual Funds of U.K. stock market as a criterion for investors’ future choices. They start their analysis by calculating the annual returns of all funds and the Jensen’s measure of performance (in the context of CAPM). Moreover, they test persistence by constructing two-way tables showing the successful performance over successive twoyear and one year period. They did not include in their sample funds that have ceased to exist or merged or started their operation after 1990 (they do not have complete observations).
Sapar and Madava(2003) evaluated performance of Indian Mutual Funds in a bear market through relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio, Sharpe’s measure, Jensen’s measure, and Fama’s measure. The study used 269 open-ended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of performance measures suggest that most of Mutual Fund schemes in the sample of 58 were able to satisfy investor’s expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk.
Roy and Deb (2003) conducted an empirical study on conditional performance of Indian Mutual Funds.
This paper uses a technique called conditional performance evaluation on a sample of eighty-nine Indian
Mutual Fund schemes. This paper measures the performance of various Mutual Funds with both unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton model.
The effect of incorporating lagged information variables into the evaluation of Mutual Fund managers’

performance is examined in the Indian context. The results suggest that the use of conditioning lagged information variables improves the performance of Mutual Fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients.
Mishra and Rahman (2002) measured Mutual Fund performance using lower partial moment. In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial moment is measured by taking into account only those states in which return is below a pre-specified “target rate” like risk-free rate. Fernandes(2003) evaluated index fund implementation in India. In this paper, tracking error of index funds in India is measured .The consistency and level of tracking errors obtained by some well-run index fund suggests that it is possible to attain low levels of tracking error under Indian conditions. At the same time, there do seem to be periods where certain index funds appear to depart from the discipline of indexation.
Pendaraki, Zopounidis, and Doumpos(2005) studied construction of Mutual Fund portfolios, developed a multi-criteria methodology and applied it to the Greek market of equity Mutual Funds. The methodology is based on the combination of discrete and continuous multi-criteria decision aid methods for Mutual
Fund selection and composition. UTADIS multi-criteria decision aid method is employed in order to develop Mutual Fund’s performance models. Goal programming model is employed to determine proportion of selected Mutual Funds in the final portfolios.
Chen and Jang (1994) evaluate the performance of 15 U.S.-based international Mutual Funds for the period 1980-89. The technique used here is the one developed by Treynor and Mazuy and refined by Lee and Rahman. Here they find that many of the international Mutual Funds outperformed the U.S. market benchmark and when a world market index is used as the benchmark, fund managers show relatively poor

performance in terms of selectivity skills. However, there is strong evidence that some managers rely rather heavily on timing skills in international capital markets.
Zakri Y.Bello (2005) matched a sample of socially responsible stock Mutual Funds matched to randomly selected conventional funds of similar net assets to investigate differences in characteristics of assets held, degree of portfolio diversification and variable effects of diversification on investment performance. The study found that socially responsible funds do not differ significantly from conventional funds in terms of any of these attributes. Moreover, the effect of diversification on investment performance is not different between the two groups. Both groups underperformed the Domini 400 Social Index and S & P 500 during the study period.
The purpose of this paper is to evaluate the performance of Mutual Fund sector of Bangladesh.
Specifically the study is aimed at: (i) presenting the overall status of Mutual Funds in Bangladesh (ii) assessing the past performance of Mutual Funds (iii) helping the potential investors for assessing the investment decision.
Several studies have been conducted based on the performance of Mutual Funds around the world.
However, no such study has been seen in Bangladesh. This study would be beneficial for the investors as well as the policy makers of Mutual Funds in Bangladesh in taking decision whether to invest directly or indirectly.
There are lots of scopes for improvement in the research for performance evaluation of Mutual Funds in
Bangladesh. Various other multi-criteria decision models could be tested for evaluating Mutual Fund

performances. Testing of fund performances in the long run with extended sample of Mutual Fund can be done in future for generating more reliable results.
Sample size is the major limitation of this study. Required sample could not be availed of due to unavailability of enough number of funds existing for 10 or 5 year periods to be applied to evaluate the performance of Mutual Funds. If a reasonable number of samples were analyzed, the paper could have a more accurate analysis. We have considered here 28-day Treasury bill rate as the risk-free rate which is considered as the risk-free rate usually in terms of performance analysis. This is another limitation because inactive Treasury bill market in Bangladesh does not represent risk-free compensation for the investors properly. Moreover, our capital market is an emerging one with tiny Mutual Fund industry. So the various financial analyses can not be applied to judge the performance of Mutual Fund.
There is a very small market for Mutual Funds having low issued capital in Bangladesh where Mutual
Funds fall into two categories: open-end funds and closed-end funds. Among 24 closed-end Mutual Funds listed in DSE, eight are managed by the Investment Corporation of Bangladesh (ICB), eight by ICB Asset
Management Co. Ltd. (a subsidiary of ICB), one by Bangladesh Shilpo Rin Shangstha (BSRS) and the remaining seven are managed by the private sector. All of the funds issued in Bangladesh up to 2009 do not commensurate properly to the theoretical framework of Mutual Fund. Notionally, Mutual Fund is formed and operated like a company where shares are issued to investors to raise fund for the investment in different sectors, comprising money market and capital market. But in Bangladesh for the Mutual
Funds from 1st ICB to 1st BSRS, various outstanding investments of the ICB were converted into different schemes and came to the market in the form of Mutual Fund through the issuance of shares to general investors. This was an off the cuff step with the purpose of creating a Mutual Fund market in the

country. These funds have been listed separately in appendices (table 1 & 2) to present the overall status of Mutual Fund industry in Bangladesh. So far all the Mutual Funds have been issued at face value, price of Mutual Fund certificates after IPO is determined on the Stock Exchanges through interaction of supply and demand. Theoretically the price of a Mutual Fund certificate can change daily. There are also three open-end Mutual Funds of which one is managed by ICB and the other two are by ICB Asset
Management Co. Ltd.
Year end Key statistics of closed-end Mutual Funds from 2007 to 2009 are given in appendices (table 1 to table 4). From 1st ICB to 1st BSRS Mutual Fund (Appendices; Table 1) market value has increased from
2007 to 2008 and from 2008 to 2009 with the exception for 4th ICB Mutual Fund in 2008(90.71% decrease in market value). Among the Mutual Funds in table 1, the same fund has experienced the highest price hike in 2009 in comparison to 2008. For Aims First to ICB AMCL Mutual Fund (Appendices; Table
3) largest change(33.39% decrease) in market value is present for Grammen Mutual Fund,Scheme two in
2009 from 2008. Both the EPS and DPS remained same for all the funds, from 1st ICB to 1st BSRS
Mutual Fund (Appendices; Table 1). The P/E ratio for all funds is ranging from 10% to 40 % and the same picture exists for the ratio of market price to NAV; funds were traded at an average of 3.75 times to their net asset value (NAV) where all of which ultimately resembles the growing demand of Mutual Fund in the market(Appendices; Table 2).
For the funds in appendices (table 3) the DPS and EPS both have kept changing with an increasing trend for the years presented. The P/E ratio for all funds is ranging from 5% to 93 % and the ratio of market price to NAV is on an average 3.5(Appendices; Table 4). It is evident from the tables that most of the
Mutual Funds are passing an increasing trend in market value but some funds (ICB AMCL Islamic MF decreased 15.63%, ICB AMCL First NRB MF decreased 19.35% in 2008)

The price-earning ratios show some excess in 2009 compared with the end of 2008 for all listed Mutual
Funds ranging from 15.22 to 95.69 (specially for the funds from ICB to BSRS)mainly due to price augmentation of Mutual Funds. The picture is same for the ratio of market price to net asset value (NAV) of all Mutual Funds in December 2009.
Although ICB is the major institutional player in the Mutual Fund market, the newly entered privately managed Mutual Funds are performing relatively well in the capital market which owns the highest share in terms of market capitalization among the issuers for the year 2009 (see figure-1). The market prices of all Mutual Funds remain much higher than their face values reflecting the investors’ confidence and their expectations of future price hikes. The reason is that, all the earlier Mutual Funds were very small in size.
Hence, the number of funds may be more for ICB, but funds size is very small.
ICB,
12.08%
ICB AMCL,
25.03%
Private
Sector,
59.41%
BSRS,
3.47%
In Bangladesh perspective, the number of Mutual Fund is growing gradually as at the IPO phase investors are profiting well. Since, investors are quite impressed by the marginal performance of the Mutual Funds; they feel interest to put money in them in the secondary market. Therefore, the consequence is clear. An

emerging secondary market for Mutual Funds has been encouraging investors of taking advantage properly, and thus making more and more investors positive towards them. However, this small market of
Mutual Funds is not happy at all at this moment. A very serious but interesting debate has been looming for last few months regarding Mutual Funds in Bangladesh. The SEC implemented revised Mutual Fund regulations on July 22, 2009 that prohibited the closed end Mutual Funds from increasing the size of
Mutual Funds through right or bonus shares to increase their capital bases. After the writ petition from investors against this amendment, The High Court on November 09, 2009 allowed Mutual Funds to raise their size by issuing bonus and rights, without curbing the securities regulator's absolute power to determine which funds would be eligible to expand the capital base although this verdict was suspended hours after the announcement giving the SEC adequate time to appeal. (Barua, 2009)
A successful performance occurs when a portfolio earns a higher return than the one that is achieved by the market at equilibrium (Kenourgios and Petropoulos, 2005). There are three well-accepted methods for evaluating the performance of Mutual Funds. Each one attempts to measure the fund’s performance in relation to a specification of the risk-adjusted return appropriate to a portfolio of the same risk.
Treynor’s performance Index: Treynor (1965) was the first one who created an index that evaluates the performance of Mutual Funds. His index is referred to as the reward-to-volatility ratio (RVOL). He measures portfolio risk with beta, and calculates portfolio’s market risk premium relative to its beta.
Sharpe’s Performance Index: Sharpe (1966) developed a composite index which is very similar to the
Treynor measure, the only difference being the use of standard deviation, instead of beta, to measure the portfolio risk, which is also known as the reward-to-variability ratio (RVAR).

Jensen’s Alpha:
Jensen (1968), on the other hand, uses αj as his performance measure. A superior portfolio manager would have a significant positive αj value because of the consistent positive residuals.
Inferior managers, on the other hand, would have a significant negative αj. Average portfolio managers having no forecasting ability but, still, cannot be considered inferior would earn as much as one could expect on the basis of the CAPM. Portfolios often fail to meet this statistical significance test because of the variability in security returns. This means that although the manager may actually add value, this cannot be detected statistically. Superior and inferior portfolio performance can derive from at least two sources. First, the portfolio manager may be able to select undervalued securities consistently enough to affect portfolio performance. Second, the manager may be able to time market turns, varying the portfolio’s composition in accordance to the rise and fall of the market.
The M 2 Measure of Performance: A variant of Sharpe’s measure was proposed by Graham and Harvey and later popularized by Leah Modigliani of Morgan Stanley and her grandfather Franco Modigliani which is dubbed into M 2 measure. Like the Sharpe ratio, the M 2 measure focuses on total volatility as a measure of risk, but the risk adjustment measurement has the easy interpretation of a differential return relative to the benchmark index. To compute the M 2 measure, at first a managed portfolio P is transformed in to P* by mixing it with a position in T-bills so that the complete or adjusted portfolio matches the standard deviation of a market index. The adjusted portfolio, P* will have the same standard deviation like the market index and then it would be worthy of to measure the performance just by comparing the returns.
Treynor-Mazuy (1966) “Quadratic Model”: The quadratic model by Treynor-Mazuy (1966) is designed to capture the nonlinearity of relationship between portfolio and benchmark returns. It is basically aimed at assesing the market timing skills of the fund mangers. As the market fluctuates, the risk premium associated with it changes. Hence a good portfolio manager would alter the sensitivity of his

portfolio to the market by increasing the beta of the portfolio during the up market and reducing it during the down market. (Bodi, Kane & Marcus, 2002).
To measure the performance of the DSE listed Mutual Funds the most commonly used composite measures, Treynor, Sharpe, and Jensen measures have been complied in this study. In addition to these,
M2 measure has also been conducted in this paper. To analyze the performance, DSE General Index
(DGEN) is considered as the benchmark portfolio and 28-day Treasury bill rate is taken as proxy of risk free rate. In this study the composite measures for the Mutual Funds are calculated for two periods ; one for 10 year periods (2000-2009) and for 5 year period (2005-2009). Mutual Funds that are operating for more than or equal to 5 years but less than 10 years are considered in the 5 year group (Appendices; Table
2). Funds that are operating for more than or equal to 10 years are considered in the 10 year group. For all funds dividend adjusted monthly rate of return index (with reinvestment assumption) have been calculated using the following formula:
R
FD
= (P t
- P t-1
) / P t-1
Where RFD denotes the rate of return index of Mutual Fund and Pt denotes the return index at time t and
Pt-1 denotes the return index at time t-1. The return index for market has also been calculated using the month-end index price with the help of the above formula. The standard deviations of those returns for the period (2000-09) and (2005-09) were calculated and monthly returns were regressed against that of the
DGEN index (Benchmark Portfolio) for the five and ten year period to determine the five and ten year period betas. Apparently due to thin trading for most of the selected Mutual Funds the calculated betas are far below than that of the benchmark portfolio. And that’s why for all of the funds beta 1 is used as estimated one along with the calculated betas. Sharpe’s measure of performance has been used where monthly reward–to-variability (ratio of risk excess return of portfolio to the total risk of the portfolio)

ratios are calculated and in Treynor measure reward-to-volatility ratio has been calculated by comparing
Mutual Fund’s market risk premium (excess return; return over risk free rate) to its beta (systematic risk of the portfolio). For each calculated measure, the larger the value of the index the better is the performance. In the Jensen’s measure of performance to obtain Jensen’s alpha (which is the intercept from regression of excess return of the managed portfolio on the excess return of benchmark portfolio) we have regressed the monthly excess return indices of the Mutual Funds for 10 year group and 5 year group against the monthly excess returns on respective benchmark i.e. DGEN for 10 year and DGEN for 5 year period using the following equation:
α = (R
FD
-R
F
) – β(R
M
-R
F
)
R
FD
denotes the fund return indices, R
F
denotes the rate of return on Treasury bill, R
M denotes the rate of return on DSE all share. Alpha (α) represents the average incremental rate of return on the portfolio per unit time where positive (α) represents the portfolio manager’s ability to forecast security prices and negative (α) says that the manager is not doing well in forecasting security prices and thereby security selection. Also a significant positive t-statistics would reject the null hypothesis that past performance is unrelated to future performance and support the alternative hypothesis that past performance is positively related to the future performance. The other co-efficient β measures the systematic risk. In M 2 measure
Mutual Funds have been mixed with T-bill to construct a combined/risk adjusted portfolio. Afterwards, all the combined portfolios’ returns have been compared with the return of DGEN to see whether the
Mutual Funds are beating the market or not after the adjustments or equalization in risk. Fund’s ranking has also been looked at to test the hypothesis of fully diversified fund. If such funds exist then they ought to be ranked identically according to all four measure of performance.
To measure the market timing ability of the Mutual Funds we have run multi-factor regression model of the monthly excess return indices of the fund against the monthly excess return of the benchmark as the

first factor and square of the excess monthly return of the benchmark as the second factor. Positive value of the second factor co-efficient represents evidence of market timing skill of the manager.
For this paper month-end closing price and dividend data were collected for the period January 2000 to
December 2009 for 10 Mutual Funds and for the period January 2005 to December 2009 for the 12
Mutual Funds from the Dhaka Stock Exchange (DSE) library. The corresponding values for the DGEN
Index were also recorded from the same source. 28-day Treasury bill rates were collected from the
Statistical bulletin of Bangladesh Bank. There are 25 listed funds in DSE but not all of them have 10 years and 5 years tenure that’s why only 10 funds are taken for 10 year period and additional 2 funds for 5 year period.
Table 5 in appendices gives the returns, standard deviation of returns and betas for the funds in our study for the five year and ten year periods. For both periods, all the Mutual Funds have been revealed with more return and higher standard deviation than those of market portfolio. Furthermore, low correlations among the funds and benchmark portfolio are observed and some of them are statistically significant depicting the low degree of diversification of the funds. All of the funds except Aims First Mutual have beta lower than 1 (which are substantially less than that of benchmark portfolio). Thin trading of the selected Mutual Funds causes the downside value of the betas for which in computation of the Treynor measurement we have used assumed beta 1 along with the computed betas for all the funds.
Sharpe Ranking:

Table 6 in appendices shows the Sharpe Index values for the 12 Mutual Funds and the market, (DGEN
Index). We have noticed that 7 Mutual Funds beat the market index during the last five year period whereas, over ten year period only one fund was superior in terms of performance index to market.
Though the funds were paying more annual return for the investors for both periods(see Table: 1 in
Appendices) but almost failed to compensate them in terms of total risk taken in the long run (ten year period). 1st BSRS fund has performed well for the last 5years and 1st ICB Mutual Fund for the last ten years. We have also noted a very low co-relation between five year and ten year ranking, which means that the funds that did well according to this measure of performance in the last five year didn’t do so well in the first five year period or in the overall ten year period, depicting the inconsistency of funds performance in comparison to the benchmark portfolio.
Treynor and Jensen Ranking:
Table 7, 8 and 9 in appendices show the Treynor and Jensen index values with ranking for the selected
Mutual Funds respectively. Treynor measure has been computed with estimated beta 1 and with regressed betas which has resulted in to the change of the performance ranking among the funds but not with the market. With calculated beta, 7 th ICB was giving highest reward in comparison to its systematic risk but it became 2 nd for 5 year period and 3 rd for the 10 year period when beta was changed to 1. Irrespective of the variation in the composition of market beaters, market index was totally outperformed by all the funds with exception to the 5 year period with calculated beta where it was 12 th out of 13 funds. For the 5-year period Treynor measure is much more responsive than that of Sharpe measure.
Jensen index has positive alpha value for both of the study periods and in both cases market is outperformed by the all selected Mutual Funds. The correlation between 5 year and 10 year ranking is very high which indicates that funds that did well in first 5 year also did well in next 5 years or for overall

10 year period. Therefore, as all funds are giving positive alpha, investors will be able to achieve higher returns by holding the managed portfolio instead of holding passively the benchmark portfolio.
Both Treynor and Jensen raking are differing almost totally from the performance ranking according to
Sharpe Measure. The differences are due to the type of risks considered for computing the three measures.
There is an overlapping in case of performance of Treynor and Jensen ranking as beta is used for both type of performance index unlike Sharpe measures where total risk of the fund is taken into account.
However, because of thin trading specially in case of Mutual Funds in Bangladesh performance index using beta may not provide the real view of the funds’ performance in comparison to benchmark portfolio
(market portfolio, DGEN Index). On the other hand, Sharpe ratio has difficulties in interpreting the fund performance; for instance, we have found that Sharpe measure of 1st ICB M.F is 0.25 and that of market is 0.22, which states that portfolio of ICB underperformed the market but the interpretation of the difference in performance (0.03) from economic point of view remains questionable. This interpretative problem is overcome by comparing the performance with the help of M 2 measure, a variant of Sharpe’s measure proposed by Graham and Harvey (1994).
M 2 Measure:
First, adjusted portfolios have been constructed by mixing the T-bill with the existing Mutual Fund to equalize the fund risk level to the market portfolio. Table 10 in appendices shows the return and ranking of the funds or the combined portfolios. In 5 year period 7 funds were giving excess return then market but for ten year the result is completely opposite; only one fund 1st ICB was giving positive excess return and all funds were beaten by the market index. In addition, the ranking of the funds differed from ten year to five-year period. So there is inconsistency in performance and 5 year results differ completely from ten year results suggesting that in the long run fund managers are not able to beat the market.

Treynor- Mazuy(1966) “Quadratic Model”:
Table 11 and graph 1 in appendices show the values of the market timing coefficients of the funds for 5 year and ten year periods. For both of the period the market-timing coefficient is found negative, showing the complete absence of market timing ability of the Mutual Fund mangers but only for the 10 year period for the fund 3rd ICB, which has alpha of 0.274 significant at 5% level. Almost all of the coefficients are significant at 5% and 10% significance level. So, the fund managers of DSE listed Mutual Funds are not skilled in changing the sensitivity of the funds portfolio with the change of the market.
This paper images an overview of the Bangladesh Mutual Fund industry and investigates the Mutual Fund risk adjusted performance using the traditional measures of performance analysis including M 2 measure and Treynor- Mazuy (1966) “Quadratic Model”. Though to make any definitive solution ten year is very short period, the performance of these funds cannot be considered better relative to that of the market portfolio. The analyzed Mutual Funds could not outperform the market except in terms of Treynor and
Jensen model where the systematic risk measure, beta of the portfolio has its problem of relevancy in case of measurement of performance analysis (due to thin trading). Following the measures of performance analysis (Sharpe and M 2 measures) Mutual Funds fail to outperform the market in the long -run and in the short run only seven Mutual Funds were above the market portfolio.
Non-identical rating and low correlation of funds with market suggest that none of the Mutual Funds are fully diversified. In case of performance attribution, market-timing ability of the fund managers were absent for the studied periods for the selected funds which says that fund manager were not active in changing the sensitivity of their funds in accordance with the market. Mutual Funds in Bangladesh started its journey with the hope of realizing extra return for the investors by pooling the savings and applying

institutional investors’ skill. Though, the industry is dominated by the state owned funds private sectors are also coming to stage and making the industry more competitive. For Bangladesh, more institutional investors are necessary to make the capital market stronger with the capacity of fund accumulation and managerial skills to improve the diversification, stock selection and market timing ability thereby the performance of the funds. Moreover, the fund mangers’ performance needs to be well supported by the sound regulatory framework and increased supply of shares in the capital market. In this study, lacking of large number of sample size and the shorten study periods are the two main limitations which suggest further studies to judge the performance of Mutual Funds in Bangladesh in later period.

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