Measuring skill in the Islamic mutual fund industry: Evidence from GCC countries

We examine the performance of Islamic mutual funds in GCC countries using the Berk and Van Binsbergen (2015) value-added measure. We find compelling evidence that skilled managers exist in the Islamic mutual fund industry. The average mutual fund has used this skill to generate approximately $198,000 per month. The bootstrap methodology highlights that this performance is not obtained by chance. Finally, we document that in bad economic times, Islamic mutual funds have lower value-at-risk and higher Sharpe ratios than conventional benchmarks, supporting the claim that they are a means of hedging against international financial crises.