Islamic mutual funds' financial performance and international investment style: evidence from 20 countries

Andreas Gerhard Hoepner, HG Rammal, Michael Rezec

    Research output: Contribution to journalArticlepeer-review

    133 Citations (Scopus)


    We pursue the first large scale investigation of a strongly growing mutual fund type: Islamic funds. Based on an unexplored, survivorship bias adjusted dataset, we analyse the financial performance and investment style of 265 Islamic equity funds from twenty countries. As Islamic funds often have diverse investment regions, we develop a (conditional) three level Carhart model to simultaneously control for exposure to different national, regional and global equity markets and investment styles. Consistent with recent evidence for conventional funds, we find Islamic funds to display superior learning in more developed Islamic financial markets. While Islamic funds from these markets are competitive to international equity benchmarks, funds from especially
    Western nations with less Islamic assets tend to significantly underperform. Islamic funds’ investment style is somewhat tilted towards growth stocks. Funds from predominantly Muslim economies also show a clear small cap preference. These results are consistent over time and robust to time varying market exposures and capital market restrictions.
    Original languageEnglish
    Pages (from-to)829-850
    Number of pages22
    JournalEuropean Journal of Finance
    Issue number9-10
    Early online date1 Mar 2011
    Publication statusPublished - Nov 2011


    • Fund manager learning
    • Home bias
    • Islamic finance
    • Islamic mutual funds
    • Responsible investment
    • Three level Carhart model


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