Introduction:

According to Cook, (2015) ‘’Mutual funds were created to make investing easy, so

consumers wouldn't have to be burdened with picking individual stocks’’ (Brainy Quote)

The main purpose of this paper is to identify the risk and return of each fund and its

history and performance between 27 mutual funds according to the past 5 years. This

relationship is distinguished by measuring the market risk premium and fund premium

using weekly T-bills, EGX100, and the holding period return of the fund. Moreover, the

MRP and FP is analyzed by using cumulative Regression Analysis and a single

Descriptive Analysis one for the funds and the other for the market.

Performance of Mutual Funds:

Mutual Funds is a company that add up money together from different people and

invests it together in stock, bonds or other assets, this combined holding is known as

portfolio. (U.S. Securities and Exchange Commission , 2005) There are 7 types of funds

Money market funds that are short term fixed income securities known as government

bonds, Fixed income funds focus on paying a fixed rate of return, Equity funds focus on

investing in stocks, Balanced funds focus on investing in mix income and capital, Index

funds focus on tracking the performance of a specific index such as ‘’ S&P/TSX

Composite Index’’, Global funds invests in assets abroad, and finally Specialty funds

focus on socially responsible investing, real estate. (Ontario Securities Commission,

2018). Performance of mutual funds is measured by two methods, Treynor ratio express

the rate of return per unit of systematic risk, this ratio estimates the return generated by

the fund over and above risk free rate of return. Sharpe ratio is almost similar to Treynor
measure. However, it expresses the ratio of returns over and above the total risk which

is standard deviation instead of considering only the systematic risk. (Petru , Wadi, &

Abbas, 2013) The third measure is called Jensen Measure, it is based on CAPM, and

the return is expressed through a portfolio that generates over its expected return by

alpha. As the return is positive it will give positive alpha and if it is negative then it will

give negative alpha. (Segal, 2017) Some factors affected the mutual funds market of

Egypt specially the past 10 years such as the inflation rate; it averaged 11.35 % from

2008 until 2018 and reaching 35.26 % in July of 2017 and decreased by 3.84 % in

September of 2012. (Egypt Core Inflation Rate, 2018)

Foreign currency is one of the factors that affected the Egyptian mutual funds as inflows

increased and reached $19.2 billion due to the Egyptian pound flotation that happened

in November. (COMMODITIES NEWS, 2017)