Chapter 2Overview of Mutual Funds in Pakistan2.1 History of Mutual FundsThere are two main types of mutual funds, open funds and closed funds for Pakistanis. investors. Close End mutual funds are traded on the stock exchange, directly each investor can buy or sell these funds on the stock exchange. The prices of these funds are determined based on the demand and supply of the shares rather than the net asset value in the case of closed-end mutual funds. In 1962, the Government of Pakistan established an open-ended mutual fund by the name of National Investment Unit Trust (NITL) commonly known as NIT. Later, the first closed-end mutual fund in Pakistan was established in 1967 as Investment Corporation of Pakistan (ICP) under the government order. Currently, both funds are regulated by a different law, according to which all investment programs in the country will be regulated by the Investment Companies and Investment Advisers Commission Rules of 1971, mutual funds at fixed capital are regulated by this law, while open-ended funds are regulated by the law. Asset Management Company Rules of 1995, which were framed by the Securities and Exchange Ordinance of 1969. Currently, 23 closed-end mutual funds are available to investors and are listed on the Stock Exchange from Karachi. NIT is the oldest and one of the largest open funds in Pakistan, with 52,000 unit holders and 19 branches and other authorized banks across the country. Open-end mutual funds are not traded on stock exchanges; subscription and redemption of funds is acceptable on an ongoing basis. The investor can purchase and redeem funds only from the issuing company and the unit prices of these funds are determined based on the net asset value, 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 into account risk factors, the performance of funds cannot measure their true performance. When comparing 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, charges and liquidity indicate that among different funds, these variables have a significant impact on the performance of mutual funds in Pakistani market in recent past. the previous empirical results provide incentive to investigate the performance of Pakistani mutual funds, especially in the recent period, using different models.