Fintech-Driven Risk and Return Analysis of Shariah-Compliant Mutual Funds: Evidence from Oman

Shariah-compliant mutual funds widen the scope of ethical investing avenues available in in Islamic finance. The enhancement of portfolio performance in these funds becomes increasingly more important with the application of new age fintech and its considerations to risk-return relationships. Moreover, there are limited studies on the risk-return configuration of Shariah mutual funds in Oman, particularly the effect of year-to-date (YTD) volatility. This study analyzes the impact of fintech-driven risk measures on the performance of the Al Kawthar Shariah-compliant mutual fund in Oman using regression analysis of monthly data from 2017 to 2024. It apples fintech techniques to determine how YTD volatility is associated with key financial parameters like Standard deviation, Sharpe ratio, and Beta, Information Ratio, and Annualized Alpha in case of Al Kawthar fund. Using regression analysis, we assess the effect of these parameters on YTD returns and risk-adjusted performance using monthly data from December 2017 to March 2024. The analysis demonstrates that the scope of prediction of these indicators accounts for 27.1% of variability in the YTD return with higher Annualized Alpha and Sharpe Ratio contributing positively to fund outcomes while YTD Volatility undermines it. The report forwards understanding of Oman’s Shariah-compliant mutual funds as well as demonstrates the efficacy fintech can have in advancing risk management frameworks and assisting fund managers towards optimized risk-return configurations.