Funds Flow and Performance of Managed Funds in Pakistan

The main purpose of this study is to examine the mutual fund industry of Pakistan, to examine the assets allocation pattern of mutual funds, how efficiently they are allocated into various assets categories and how investors base their future investment decisions either on past performance or on the basis of risk, size of fund, and availability of alternative investments. On the basis of results it is noted that on average small and medium investors prefer investments in less risky assets and base their future investment decisions on the basis of past performance whereas big corporate investors calculate risk and make their investment decisions after complete analysis. This study uses panel regression model to test the relationship between past performance and excess returns. The results indicate that fund managers use past performance of a fund as marketing tool to attract investors to invest in a fund which are performing well in recent past. These findings are of immense importance for policy makers as well, to formulate policies which are beneficial for investors and do not allow fund managers to get advantage from investors