Analysis of Mutual Fund's Performance and Persistence in Indonesia

The performance of actively managed mutual fund is largely dependent upon the investment decision of the fund managers amongst the other factors. This study examines the determinants of mutual fund performance in one of the emerging markets (Indonesia), with an emphasis on the factor of ability of investment manager. This study offers new insights into the Indonesian mutual fund industry. The results regarding the determinants examined (total risk, systematic risk, fund age, size, , stock selection, market timing and expenses ratio) show significant relation between total risk, fund age, stock selection, market timing, and fund performance. While no significant relation found between systematic risk and fund size, and the fund performance. For the common investor who wanted to invest in Mutual Funds in an emerging market like Indonesia's market during the period 1/ 1/ 2008 - 31/ 3/ 2011, the selection criteria that could had provided the best results in selecting the fund were fund with low total risk, old fund, no timing ability for manager, stock selection ability, and low expenses ratio. In contrast, size of the fund and its systematic risk appeared to be statistically irrelevant in this study. These selection criteria influence the performance of mutual funds in one of the emerging markets. The result of having a relation between total risk, market timing ability and fund performance in an emerging market clearly warrant future studies.