Performance Metrics of Mutual Funds: A Critical Analysis

DOI:10.34047/MMR.2025.12202

Abstract

This research paper explores how well selected mutual fund schemes perform by examining them through three widely accepted measures: Sharpe Ratio, Treynor Ratio, and Jensen’s Alpha. These tools help assess not just the returns, but how those returns relate to the risk taken by the fund managers. The Sharpe Ratio evaluates overall return relative to total risk, Treynor focuses on the return per unit of market risk, and Jensen’s Alpha measures the fund’s ability to generate excess returns above what the market alone would predict. Using historical data from a range of equity mutual funds, the study provides a comparative look at how effectively different funds manage risk while aiming to deliver value. The results highlight which funds stand out in terms of performance and consistency, offering practical insights for investors, fund managers, and financial advisors. This evaluation supports more thoughtful decision-making when selecting mutual fund investments.