'Mutual Funds\r'

'INVESTIGATING correlative currency IN GHANA: IT’S RISK, repay AND PERFORMANCE ABSTRACT Over the years, empowerors affirm been attracted to interchangeable cash. This line of business seeks to do an-depth analysis of the gold coastian joint enthronization trust industriousness in the midst of the years 2006 and 2010. An pure(a) literature review on plebeian specie and portfolio diversification go outing be conducted. An assessment of the surgical process of coarse capital impart be make using the Sharpe and Sortino proportions as well as the Jensen important. Comparisons exit be made with analogous indices to determine the attractive feature of the constancy.\r\nThe investment strategy of pedigree managers get out alike be analysed and recommendations made. This paper will provide investors with a commodious everyplaceview of the gold coastian usual memory industry, its chthoniclying take chancess and settles. INTRODUCTION The potential confli ct between vernacular inventory companies and the people who invest in them is a classic example of an agency problem. Consumers would like the fund in which they invest to practice its judgment to maximize insecurity- change expected returns (Chevalier and Ellison, 1997).\r\nMeasuring the action, happen and returns of unwashed bills thus becomes imperative as rational investors gather up such(prenominal) information to make investment decisions. tally to an article create by All Africa on the 8th of November, 2010, figures released by gold coast’s statistical service indicated that the country’s economy stood at GH? 44 billion, 60% more(prenominal) than estimated earlier. Per this figure, the country was deemed to pee-pee attained middle income status. Ghana recorded at the period, the largest Per Capita Income in West Africa and ranked 21st in the simple.\r\nThe Ghanese economy’s steady step-up has attracted both domestic and international in vestors. Among the many an(prenominal) investment opport unities in the country available to investors is the attractive reciprocal fund industry which provides numerous gains to its investors. match to the Securities and flip-flop Commission, the number of mutual fund companies increased from 7 in the year 2008 to 9 in 2009. The list Net Asset Value of cash under circumspection by mutual silver companies was GH? 95,817,222. 27 in 2009 while total fund militarization stood at GH? 40,433,682. 0. A summary of the proceeding of the mutual fund industry in 2009 is sh feature in tables 1 and 2 in the appendix. This information provides several points of am utilization as to how the Ghanian mutual fund industry has performed over the years and more importantly how it comp ars to different analogous mutual cash in hand in the continent and elsewhere. This has informed the choice of enquiry and the need for inquiry in the proposed atomic number 18a. Measuring the execution , risk and returns of mutual funds in the Ghanaian fiscal food market has implications for a host of stakeholders.\r\nAIMS AND RESEARCH OBJECTIVES The general objective of this look into is to assess the risks and returns associated with investing in mutual funds in Ghana. The study also aims to draw a comparison between the execution of instrument of the Ghanaian mutual funds industry and similar financial markets. To pass on the general objectives, the following specific objectives stimulate been conjecture to guide in selective information collection and analysis. 1. To signalize what makes mutual funds attractive to investors in Ghana 2. To identify the types of mutual funds available to Ghanaian investors 3.\r\nTo placard the performance of mutual funds between 2006 and 2010 4. To compare Ghanaian mutual funds performance with similar market indices 5. To make recommendations to improve the trouble of mutual funds LITERATURE REVIEW According to Haslem, 2009, investing in common funds has with many utilitys. A primary advantage is the professional management of investors’ m stary. Investors purchase funds because they do not perplex the time or the expertise to manage their own portfolio. Secondly, by owning shares in a mutual fund instead of owning individual stocks or bonds, an investor’s risk is spread out.\r\nThe idea behind diversification is to invest in a large number of assets so that a loss in any exceptional investment is minimized by gains in others. Again, if you barter for only one security at a time, the transaction fees will be relatively large. correlative funds are able to take advantage of their buying and takeing size and thereby compress transaction costs for investors. Finally, mutual funds pressurize liquidity as an investor shadower also sell his shares at any time. International mutual funds are key contributors to the globalization of financial markets and one of the main sources of capital flows t o emerging economies.\r\nDespite their vastness in emerging markets, little is known close to their investment allocation and strategies (Kaminsky et al. , 2001). blood line managers heretofore have numerous strategies for stock selection, identifying underappreciated or cheap securities, seeking growth potential and following past legal injury trends (Chan et al. , 2002). According to them, most mutual funds evolve investment styles that cluster around a broad market benchmark. Few funds take primitive positions away from the index, but those who do are more likely to favor growth stocks and past winners. Licensing requirements for operating(a) a mutual fund in Ghana\r\nA Mutual stock Company must be incorporated under the Companies Code 1963 (Act 197) as a public limited liability ships caller-out with the sole aim of holding and managing portfolio of securities and other financial assets. An application is then made by the company to the Securities and step in Commiss ion (SEC) for a license to operate on the fund. Company regulation, Management agreement, Custodial agreement and a Prospectus are required by the representation for review before a license is make outd (SEC, 2011). These mean requirements help ensure a robust industry with compliant firms.\r\nMeasuring mutual funds performance Considerable progress has been made in tierce closely related areas †the theory of portfolio selection, the theory of the determine of capital assets under conditions of risk and the behavior of stock-market prices. Results obtained in all three areas are relevant for evaluating mutual fund performance (Sharpe, 1966). A number of measures have been used over the years for meter the performance of mutual funds. The Sharpe ratio, Sortino ratio and Jensen Alpha are among the a few(prenominal) distinguished ones. METHODS OF ANALYSING DATA\r\nData to be analysed will be gathered from company websites. There are a few methodologies that I intend to use for the purposes of analyzing info collected. These will measure the performance of Ghanaian mutual funds, asses its risk, volatility and return. * Sharpe Ratio This is a ratio developed by William F. Sharpe, a Nobel laureate, for the measuring of risk-adjusted performance in 1966. It measures the amount of excess return per unit of volatility provided by a fund. It is measured by divided the excess return of a fund by its volatility. Algebraically, we have: Sharpe Ratiop\r\nAll numbers are expressed usually expressed on an yearly basis, so the Sharpe ratio itself is expressed on an annual basis. The interpretation of the Sharpe ratio is straightforward: the higher the ratio the better. A high ratio means that the fund delivered a high return for its level of volatility. In contrast, a ratio of 1. 0 indicates a return on investment that is proportional to the risk taken in achieving that return. A Sharpe ratio of less than 1. 0 shows a return on investment trim down than the r isk taken (Lhabitant, 2006). This ratio is appropriate for measuring the performance of mutual funds in Ghana for the purposes of the study. Sortino Ratio This ratio was developed by bold Sortino. It is an extension of the idea behind the Sharpe ratio that calls for charge to an investor’s return target or token(prenominal) accepted return (MAR). The ratio uses target fishing gear deviation in the denominator instead of the standard deviation. This is particularly useful when the return target is of importance to the investor (Christopherson et al. , 2009). * Jensen Alpha The average return on a portfolio over and above that predicted by the capital asset determine model (CAPM), given the portfolios beta and the average market return.\r\nDeveloped by Michael C. Jensen, this measure of a portfolios alpha value is the most widely used measure of the risk to return trade-off. It is also known as the abnormal return or the risk adjusted excess return (Russell, 2011). The sk ewness and kurtosis of the distribution of the data will also be analysed and discussed whiles comparing risk and return. RESEARCH STRATEGY, TIME SCALES AND RESOURCE IMPLICATIONS This seek will involve the fabrication and analysis of quantitative data available to the public. Literature on existing look in mutual funds assessment will be discussed.\r\nOther electronic sources of information such as online journals, articles, eBooks and databases will be accessed. Business reports and articles published in Ghanaian newspapers and journals such as the Securities and put back Commission Reports will also be consulted. The risk and return of a sample of mutual funds in Ghana will be calculated and discussed. A comparison will then be made with a benchmark performance in a market that has macroeconomic conditions similar to Ghana. This is reassert as it enables logical submissions to be made from the comparisons. The use of financial markets indices will be employed.\r\nConclusions will be drawn and recommendations made on how fund managers can heighten the performance of mutual funds in Ghana. Any lapses in the Ghanaian mutual funds industry will be pointed out. There will be no questionnaires involved or the gathering of primary data for the purposes of this study. Microsoft Excel and SPSS are the computer software packages that will be used to analyse data. No costs will be incurred for their usage as they are already in my possession. LIMITATIONS OF THE admit inessential data has the limitation of not being impelling in predicting the future.\r\nTime constraints may also be faced as a number of mutual funds will have to be analysed severally and compared with other indices. The later limitation will however be overcome by effective time management and committing to the developed Gantt chart. RESEARCH ETHICS In the conduct of this research, the highest ethical standards will be observed. The issue of confidentiality of information will not arise as all data to be analysed in the research is already available to the public. The sources of information will be duly referenced and accognitiond.\r\nMy independence from the organisations under study will ensure accountability and objectivity of the research. know and accepted methods of analyzing data will also be used to avoid fabrication and falsification. SIGNIFICANCE OF THE STUDY This study will fill the gap of knowledge about the performance of Ghanaian mutual funds. Fund managers as well as investors will benefit from the study and its recommendations. The study is significant as Ghanaian investors are increasingly being attracted to the mutual funds industry and its ability to effectively diversify their risk. GANTT map workweek 1 25/09 | Week 2 2/10| Week 3 9/10| Week 4 16/10| Week 5 23/10| Week 6 30/10| Week 7 6/11| Week 8 13/11| Week 9 20/11| TOPIC AGREED| | | | | | | | | | AIMS & OBJECTIVES| | | | | | | | | | OPENING SECTIONS| | | | | | | | | | engage OUTLINE| | | | | | | | | | LITERATURE REVIEW| | | | | | | | | | METHOD/ address| | | | | | | | | | ANALYSIS/ RESULTS| | | | | | | | | | DISCUSSIONS/ CONCLUSIONS| | | | | | | | | | REFERENCE/ ACKNOWLEDGEMENT| | | | | | | | | | BINDING| | | | | | | | | | introduction TO FACULTY| | | | | | | | | | REFERENCES 1. All Africa. Ghana: Nation Attains snapper Income Status. Online]. Retrieved from: http://allafrica. com/stories/201011081261. html (accessed 30 August, 2011) 2. Chan, L. K. C. , Chen, H-L. and Lakonishok, J. , On Mutual Fund investment Styles. The Review of Financial Studies, Vol. 15, No. 5 (Winter, 2002), pp. 1407-1437. 3. Chevalier, J. and Ellison, G. , Risk Taking by Mutual silver as a Response to Incentives. The Journal of governmental Economy, Vol. 105, No. 6. (Dec. , 1997) pp. 1167 †1200. 4. Christopherson, J. A. , Carino D. R. and Ferson, W. E. , Portfolio Performance Measurement and Benchmarking. McGraw-Hill (2009), USA. 5. Haslem, J. A. Mutual monetary resource: Portfolio Structures, Analysis, Management, and Stewardship. jakes Wiley and Sons (2009), New Jersey. 6. Kaminsky, G. L. , Lyons, R. K. and Schmukler, S. L. , Mutual Fund Investment in Emerging Markets: An Overview. The World Bank stinting Review, Vol. 15, No. 2 (2001), pp. 315-340 7. Lhabitant, F-S. , Handbook of Hedge Funds. John Wiley and Sons(2006), London 8. Russell. Jensen Alpha. [Online]. Retrieved from: http://www. russell. com/us/glossary/analytics/jensen_alpha. htm (accessed 20 July, 2011) 9. Securities and supersede Commission Ghana. What are Mutual Funds? Online]. Retrieved from: http://ww. secghana. org/investor/display_mutualfunds. php (accessed 20 July, 2011) 10. Securities and Exchange Commission (2009) Annual Report, Accra Ghana. 11. Sharpe, W. F. , Mutual Fund Performance. The Journal of Business, Vol. 39, No. 1, Part 2: Supplement on Security Prices. (Jan. , 1996). Pp. 119- 138 APPENDIX flurry 1. 0 NET ASSET VALUE OF usual FUNDS IN GHANA (2009) origin: Securities and Ex change Commission Report (2009) TABLE 2. 0 FUNDS MOBILISED BY GHANAIAN MUTUAL FUNDS (2008 AND 2009) Source: Securities and Exchange Commission Report (2009)\r\n'