Comparative Performance of Equity and Fixed-Income Mutual Funds in Indonesia and Implications for Islamic Portfolio Management

Abstract

This study compares the performance of conventional equity and fixed-income mutual funds registered with the Otoritas Jasa Keuangan (OJK) in Indonesia and interprets the findings through Modern Portfolio Theory (MPT) and an Islamic investment perspective. The study uses a sample of equity and fixed-income mutual funds selected from eligible investment managers through simple random sampling. Performance is evaluated using Net Asset Value (NAV), return, standard deviation as a measure of total risk, and Risk Adjusted Return (RAR), while differences between fund categories are assessed using a binary dummy-regression model. The findings indicate that equity and fixed-income mutual funds do not exhibit meaningful differences in NAV and return, whereas their risk characteristics and risk-adjusted performance differ. Fixed-income mutual funds show a more favorable return-to-risk profile during the observation period, mainly because of their relatively lower volatility. These results support the MPT proposition that investment performance should be assessed by considering return together with the risk required to generate it rather than by relying solely on nominal returns. From an Islamic portfolio-management perspective, the findings do not constitute direct evidence on Sharia mutual funds, but they emphasize the relevance of diversification, defensive asset allocation, and risk-adjusted efficiency. A comparable Sharia-compliant strategy should rely on screened equities, sukuk, and other permissible instruments while avoiding riba, excessive gharar, and maysir.