Chapter 2 Overview of Mutual Funds in Pakistan 2.1 History of Mutual Funds There are two main types of mutual funds available: open-ended funds and closed-ended funds for Pakistan investors . Close End Mutual Funds are traded on the stock exchange, directly any investor can buy or sell these funds on the stock market. The prices of these funds are determined on the basis of supply and demand for the shares rather than net asset value in case of closed-end mutual funds. In 1962, the Government of Pakistan established an open-end mutual fund by the name of National Investment Unit Trust (NITL) commonly known as NIT. Subsequently, the first closed-end mutual fund in Pakistan was established in 1967 with the name Investment Corporation of Pakistan (ICP) under the Government Ordinance. Currently both funds are governed by a different law, according to which all investment schemes in the country will be regulated by the Commission Investment Companies and Investment Adviser Rules of 1971, closed-ended mutual funds are regulated by this law, while open-ended funds are governed by the Asset Management Company Rules, 1995, which were framed under the Securities and Exchange Ordinance, 1969. There are currently 23 closed-end mutual funds available for investors listed on the Karachi Stock Exchange. NIT is the oldest and one of the largest open-ended funds of Pakistan with 52,000 unit holders with 19 branches and other licensed banks across the country. Open-end mutual funds are not traded in the stock market; Subscription and redemption of funds are acceptable on an ongoing basis. The investor can purchase and redeem the fund only at the issuing company and the unit prices of these funds are determined on the basis of net asset value, which… amidst paper decisions. This difficult balance can only be achieved if institutional investors in general, and mutual funds in particular, are encouraged to play a significant role in corporate governance. Khan and Jawad (2008) without taking risk factors into consideration, the return of funds cannot measure their actual performance. If you compare the performance of income funds in Pakistan, these funds underperform the market by at least 50 basis points. Rauf and Afza (2009) showed that different fund attributes such as fund size, expenses, age turnover, loads and liquidity indicate that among various funds these variables had significant impact on the performance of mutual funds in Pakistan market in the recent past. The above empirical findings motivate to investigate in the case of Pakistani mutual fund performance, especially in the latest period, using different models.