The investment performance of U.S. Islamic mutual funds

Abstract

Abstract: Islamic investment funds have become increasingly important because of high demand from many investors, including those outside the Muslim investment community. This article compares the performance and risk sensitivity of Islamic mutual funds in the United States with that of their conventional peers. This article also analyzes the performance of Islamic funds, and compares this performance with that of socially responsible investment (SRI) mutual funds. Capital Asset Pricing Model (CAPM)-based methodology was used for the analysis. The results suggest that over the entire study period (1987-2018), Islamic funds outperformed conventional funds with comparable characteristics. However, over the most recent period (2000-2018), there were no significant differences in performance. Moreover, Islamic funds achieved levels of adjusted performance that did not significantly differ from those of SRI funds. Conversely, for the earlier period (1987-2000), Islamic funds performed worse than SRI and conventional funds with similar characteristics.