Indonesian mutual funds: performance determinants and interaction of macroeconomic factors

Abstract

We examine the determinants of fund returns of equity, fixed income, mixed, and money market mutual funds in Indonesia. Our empirical findings suggest that previous fund performances are significant determinants of current fund performances. On the other hand, fund age, management fee, and management period of the investment manager are not significant determinants of fund performances. Fund size is a significant determinant of fund performances only for equity funds. Furthermore, introducing the interest rate as a moderator variable weakens the effect of fund size on fund returns only for equity funds and it weakens the effect of the exchange rate on fund performances for equity and money market funds. For fixed income and mixed funds, the moderator variable does not change the effects of fund size and the exchange rate on fund performances. Overall, the robustness tests using three partitions of fund performances, namely bottom 20%, middle 60%, and top 20%, confirm our main findings. An interesting result is that returns of middle performers of fixed income funds are more sensitive to the changes of determinants than those of bottom and top performers.