Islamic mutual funds: risk and return management

Adi Gunanto*  -  Universitas Muhammadiyah Surakarta, Indonesia
Lubna M. Omar Hamzalouh  -  University of Benghazi, Libya
Sunarmi Sunarmi  -  Universitas Aisyah Pringsewu, Indonesia
Mohammad Ridwan  -  Universitas Muhammadiyah Semarang, Indonesia

(*) Corresponding Author
DOI: 10.21580/jiafr.2024.6.1.18034

Purpose - This research aims to provide a deeper understanding of the risks associated with investing in sharia fixed income mutual funds and how these risks can affect investment returns.

Method - This research adopts a quantitative descriptive research approach that focuses on numerical data. The operational definition of mutual fund risk in this study refers to the concept of risk defined as the variability of returns from the type of securities that will form the portfolio. The securities that are the focus of this research are sharia fixed income mutual funds.

Result - The performance of sharia fixed income mutual funds from 2021 to 2022 shows positive and significant developments.

Implication - The findings of this research have significant implications for financial policymakers and investors. Furthermore, this research emphasizes the importance of ethical investment choices and compliance with sharia principles, providing investors with financial security and ethical satisfaction.

Originality - This research contributes to the field of research by providing a comprehensive analysis of the risk and return characteristics of sharia fixed income mutual funds. Additionally, this research offers a more holistic view of investment performance.

Keywords: sharia fixed income mutual funds; investment risk; investment return; sharia compliance; financial security

  1. Agarwal, V., Ma, L., & Mullally, K. (2023). Managerial multitasking in the mutual fund industry. Financial Analysts Journal, 79(2), 65-75.
  2. Alfalisyado, A., & Anggara, A. A. (2023). Sharia-compliant VS Conventional Mutual Fund in Indonesia: An Evaluation Based on Portofolio Performance. Riwayat: Educational Journal of History and Humanities, 6(3), 1654-1661.
  3. Ali, M. A., Aqil, M., Alam Kazmi, S. H., & Zaman, S. I. (2023). Evaluation of risk adjusted performance of mutual funds in an emerging market. International Journal of Finance & Economics, 28(2), 1436-1449.
  4. Alichi, A., Shibata, I., & Tanyeri, K. (2021). Fiscal policy multipliers in small states. Economía, 21(2), 69-114.
  5. Al-Jarhi, M. A. (2017). An economic theory of Islamic finance. ISRA International Journal of Islamic Finance, 9(2), 117-132.
  6. Alnori, F., & Bugshan, A. (2023). Cash holdings and firm performance: empirical analysis from Shariah-compliant and conventional corporations. International Journal of Islamic and Middle Eastern Finance and Management, 16(3), 498-515.
  7. Alsubaiei, B. J. (2023). Does family size matter to investors? Evidence from mutual fund flow in Saudi Arabia. International Journal of Emerging Markets, 18(12), 5565-5580.
  8. Alsubaiei, B. J., Calice, G., & Vivian, A. (2024). How does mutual fund flow respond to oil market volatility?. The European Journal of Finance, 30(1), 28-52.
  9. Ammer, J., Rogers, J., Wang, G., & Yu, Y. (2023). Chinese asset managers’ monetary policy forecasts and fund performance. Management Science, 69(1), 598-616.
  10. Asutay, M., Aziz, P. F., Indrastomo, B. S., & Karbhari, Y. (2023). Religiosity and Charitable Giving on Investors’ Trading Behaviour in the Indonesian Islamic Stock Market: Islamic vs Market Logic. Journal of Business Ethics, 188(2), 327-348.
  11. Atta, A. A. B., & Marzuki, A. (2020). Islamic vs conventional funds within the family: Selectivity skills and market timing ability. Journal of Islamic Monetary Economics and Finance, 6(2), 439-462.
  12. Bessembinder, H., Cooper, M. J., & Zhang, F. (2023). Mutual fund performance at long horizons. Journal of Financial Economics, 147(1), 132-158.
  13. Bilbao‐Terol, A., Arenas‐Parra, M., & Bilbao‐Terol, C. (2023). Measuring the overall efficiency of SRI and conventional mutual funds by a diversification‐consistent DEA model. International Transactions in Operational Research, 30(5), 2224-2256.
  14. Bougatef, K., & Kassem, O. (2023). Do Market Timing Incentives Affect The Debt-Equity Choice Of Malaysian Shariah-Compliant IPOs?. Journal of Islamic Monetary Economics and Finance, 9(4), 589-610.
  15. Choi, J., Kronlund, M., & Oh, J. Y. J. (2022). Sitting bucks: Stale pricing in fixed income funds. Journal of Financial Economics, 145(2), 296-317.
  16. Chowdhury, M. I. H., Balli, F., & de Bruin, A. (2024). Investment styles of islamic equity funds. International Review of Economics & Finance, 89, 172-187.
  17. Dannhauser, C. D., & Spilker III, H. D. (2023). The Modern Mutual Fund Family. Journal of Financial Economics, 148(1), 1-20.
  18. Gunanto, A. (2023). The Influence of Financial Indicators and Underwriter Reputation on Depreciated Stock Prices. JAF (Journal of Accounting and Finance), 7(2), 84-104.
  19. Gutiérrez Ponce, H., Chamizo González, J., & Al-Mohareb, M. (2023). Sustainable finance in cybersecurity investment for future profitability under uncertainty. Journal of Sustainable Finance & Investment, 13(1), 614-633.
  20. Hassan, A., Chachi, A., & Munshi, M. R. (2020). Performance measurement of Islamic mutual funds using DEA method. Journal of Islamic Accounting and Business Research, 11(8), 1481-1496.
  21. Hassan, M. K., Aliyu, S., Paltrinieri, A., & Khan, A. (2019). A review of Islamic investment literature. Economic Papers: A journal of applied economics and policy, 38(4), 345-380.
  22. Hassan, M. K., Khan, M. Z. H., Miah, M. A., & Islam, M. K. (2024). The national-level potential of Zakat and its integration into the fiscal framework: sector-specific insights from the economy of Bangladesh. International Journal of Islamic and Middle Eastern Finance and Management, 17(1), 146-169.
  23. Hati, S. R. H., Prasetyo, M. B., & Hendranastiti, N. D. (2023). Sharia vs non-sharia compliant: which gives much higher financial-based brand equity to the companies listed in the Indonesian stock market? Journal of Islamic Marketing, 14(9), 2167-2187.
  24. Hsieh, M. F., Lee, C. C., & Shen, M. F. (2023). Ownership structure, diversification, and bank performance: International evidence. Emerging Markets Finance and Trade, 59(1), 90-112.
  25. Huang, H., Jiang, L., Leng, X., & Peng, L. (2023). Bootstrap analysis of mutual fund performance. Journal of Econometrics, 235(1), 239-255.
  26. Huda, M., Suminto, A., Sa’diah, S., & Abadi, M. K. R. (2023). Analysis The Influence of Sharia Capital Market and Sharia Macroeconomic Variables on Indonesia’s Economic Growth. Jurnal Ilmu Ekonomi dan Bisnis Islam, 5(2), 113-133.
  27. Iqbal, Z., & Mirakhor, A. (1999). Progress and challenges of Islamic banking. Thunderbird International Business Review, 41(4‐5), 381-405.
  28. Ishak, M. S. I., & Rahman, M. H. (2021). Equity-based Islamic crowdfunding in Malaysia: a potential application for mudharabah. Qualitative Research in Financial Markets, 13(2), 183-198.
  29. Islam, S. M. (2022). Impact investing in social sector organisations: A systematic review and research agenda. Accounting & Finance, 62(1), 709-737.
  30. Jiang, Y. (2023). Financing water investment for global sustainable development: Challenges, innovation, and governance strategies. Sustainable Development, 31(2), 600-611.
  31. Jin, Q., Basso, A., Funari, S., Kerstens, K., & Van de Woestyne, I. (2024). Evaluating different groups of mutual funds using a metafrontier approach: Ethical vs. non-ethical funds. European Journal of Operational Research, 312(3), 1134-1145.
  32. Kaniel, R., Lin, Z., Pelger, M., & Van Nieuwerburgh, S. (2023). Machine-learning the skill of mutual fund managers. Journal of Financial Economics, 150(1), 94-138.
  33. Kudria, S., Ivanchenko, I., Tuchynskyi, B., Petrenko, K., Karmazin, O., & Riepkin, O. (2021). Resource potential for wind-hydrogen power in Ukraine. International Journal of Hydrogen Energy, 46(1), 157-168.
  34. Liu, C., Lin, D., Wang, Y., & Qi, S. (2023). A new market risk management approach for commercial banks' fixed‐income securities trading accounts. International Journal of Finance & Economics, 28(1), 225-235.
  35. Liu, T. Y., & Lee, C. C. (2022). Exchange rate fluctuations and interest rate policy. International Journal of Finance & Economics, 27(3), 3531-3549.
  36. Malhotra, D. K., Mooney, T., Poteau, R., & Russel, P. (2023). Assessing the performance and risk-adjusted returns of financial mutual funds. International Journal of Financial Studies, 11(4), 136.
  37. Maulida, A. Z., Risdiana, R., & Purnomo, A. (2023). Performance of Indonesia's Sharia Capital Market for the 2022 Period. Journal of Islamic Economics and Philanthropy, 5(4), 97-113.
  38. Md Husin, M., Aziz, S., & Iqbal, M. (2024). A bibliometric and visualization analysis of Islamic fund management research. Journal of Islamic Marketing, 15(2), 573-594.
  39. Meli, J., & Todorova, Z. (2023). Credit ETFs in Mutual Funds and Corporate Bond Liquidity. Financial Markets, Institutions & Instruments, 32(3), 89-114.
  40. Naveed, F., Khawaja, I., & Maroof, L. (2020). Are Islamic mutual funds exposed to lower risk compared to their conventional counterparts? Empirical evidence from Pakistan. ISRA International Journal of Islamic Finance, 12(1), 69-87.
  41. Peirong, P., & Al‐Tabbaa, O. (2021). The effect of the Chinese government policies on outward foreign direct investment by domestic enterprises: A policy analysis. Strategic Change, 30(6), 561-572.
  42. Reboredo, J. C., & Otero Gonzalez, L. A. (2022). Low carbon transition risk in mutual fund portfolios: Managerial involvement and performance effects. Business Strategy and the Environment, 31(3), 950-968.
  43. Robiyanto, R., Santoso, M. A., & Ernayani, R. (2019). Sharia mutual funds performance in Indonesia. Business: Theory and Practice, 20, 11-18.
  44. Sandwick, J. A., & Collazzo, P. (2021). Modern portfolio theory with sharia: a comparative analysis. Journal of Asset Management, 22(1), 30-42.
  45. Tahiri Jouti, A. (2021). The Fourth Market theory and interest rate benchmarking in the Islamic finance industry. ISRA International Journal of Islamic Finance, 13(1), 46-65.
  46. Tawfik, O. I., & Elmaasrawy, H. E. (2024). Effect of Shariah compliance on financing decisions: empirical evidence from GCC. Journal of Islamic Accounting and Business Research, 15(1), 196-223.
  47. Waqas, M., Mian, S. J., & Nazir, N. (2023). The role of religious advertising and personal selling in enhancing mutual fund purchase intention and sales in Pakistan: a managerial perspective. Journal of Islamic Marketing, 14(1), 43-60.
  48. Widyastuti, U., Febrian, E., Sutisna, S., & Fitrijanti, T. (2021). Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia. Journal of Islamic Accounting and Business Research, 13(1), 114-140.
  49. Williamson, B., & Komljenovic, J. (2023). Investing in imagined digital futures: the techno-financial ‘futuring’of edtech investors in higher education. Critical Studies in Education, 64(3), 234-249.
  50. Yarovaya, L., & Mirza, N. (2022). The price reaction and investment exposure of equity funds: evidence from the Russia–Ukraine military conflict. The Journal of Risk Finance, 23(5), 669-676.
  51. Yusfiarto, R., Nugraha, S. S., Mutmainah, L. L., Berakon, I., Sunarsih, S., & Nurdany, A. (2023). Examining Islamic capital market adoption from a socio-psychological perspective and Islamic financial literacy. Journal of Islamic Accounting and Business Research, 14(4), 574-594.

Journal of Islamic Accounting and Finance Research
Published by Department of Sharia Accounting, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo Semarang, Indonesia
Jl Prof. Dr. Hamka Kampus III Ngaliyan Semarang 50185
Phone: +62 852-2589-5726
Website: https://febi.walisongo.ac.id/
Email: jiafr@walisongo.ac.id

ISSN: 2715-0429 (Print)
ISSN: 2714-8122 (Online)

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

View My Stats
apps