The Performance of the Global Sharia Equity Mutual Funds in Indonesia

This study examines the risk and returns characteristics of global sharia equity mutual funds in Indonesia. The Indonesian financial regulators released the permission to the Asset Management Companies to launch the global sharia equity funds in February 2016. This study has an objective to support Indonesian government by evaluating the performance of the Indonesian global sharia equity fund in the short-term period. To examine the fund performance, this paper is using the Jensen measure that calculated by the single index model. In additions, the benchmarks are included FTSE Sharia Asia Pacific ex Japan Index, Dow Jones Islamic Market World Index, and MSCI AC Asia Islamic ex Japan Index. These funds that actively managed are did not present high performance against benchmark indices, most of the funds are under performed. During the sample period, returns of global funds move in opposite direction to the exchange rate movement, although, there is no significant evidence of the sensitivity of funds return to exchange rate movement and Jakarta Islamic Index as a domestic Islamic Index. Besides that, we extend our findings to analyze the expense ratio relationship to the performance of the fund in the short-term period. As a new product, the global sharia equity mutual funds in Indonesia present under-perform of the benchmark, however, in average still produce a positive return. According to our finding, Indonesian investor can still gain the benefit of diversification and opportunity to gain returns from exchange rate movement in investing in the global sharia equity mutual funds