Based on the phenomenon and literature review, to determine that the optimal performance of a mutual fund can be influenced by asset allocation policies, investment manager performance, and the level of risk, hypothesis testing was carried out on the performance of money market mutual funds. Figure 1 illustrate the relationship between the variables. The arguments that drive the relationships of studied research variables are as follows: (1)

Asset allocation policy

Asset allocations refer to various asset classes (e.g., money market securities, bank accounts, long-term bonds, stocks, tangible assets, and others) that are allocated in investment portfolios. ¹³ Asset allocation is also defined as various asset classes invested according to their composition and proportion. Hence, performance depends on the allocation of the funds. ¹⁴ The Asset Class Factor Model ¹⁵ can measure the effectiveness of the asset allocation policy. To gain a greater return for investors, the appropriate allocation of funds is carried out to encourage the performance of Islamic equity funds. ^{16 , 17} The notion of allocation funds is also supported by research that found that stock mutual funds have positive and significant results influenced by policy. ^{18 - 20} Moreover, findings from another empirical study explained that the asset allocation policy affects the performance of equity funds. ^{11 , 21} Hypothesis 1:

Asset allocation policy has a significant effect on the performance of Islamic money market mutual funds that are registered with the OJK.

Prior research affirmed that the measurement of investment manager performance includes assessing the ability to manage investor funds, asset selection, investment timeliness, and diversification through portfolios. ¹¹ Investment manager performance can be measured through two abilities, namely the market timing ability (an investment manager’s ability to invest according to the market conditions) and Stock Selection Ability (an investment manager’s ability to determine asset choices and manage investor funds). ⁷ Furthermore, empirical research also showed that the investment managers’ abilities include decomposing assets, estimating the predictability of asset performance, market timing, and the portfolio of asset selection. ²²

To optimize mutual fund performance and returns, one of the supporting indicators is the performance of investment managers, which includes a composition of market timing abilities and stock selection abilities. ⁷ In line with that, further research found that the performance of investment managers has a significant effect on the performance of equity funds. ¹⁰ Hypothesis 2:

Investment managers’ ability significantly affects the performance of Islamic money market mutual funds registered with the OJK.

A risk is a form of uncertainty about things that will occur later in investment decisions and include interest rate, market risk, inflation risk, business risk, financial risk, liquidity risk, currency exchange risk, and country risk. ²³ Risk is also defined as a difference between the expected and actual returns; the greater the difference, the greater the risk. ²⁴ According to empirical research, every investment of funds in the form of a portfolio has a risk, ^{25 , 26} which means that an investment has a risk that affects the performance of Islamic mutual funds. ¹⁶ Further research also concluded that the level of risk influences the performance of equity funds. ⁷ Hypothesis 3 :

Risk level has a significant effect on the performance of Islamic money market mutual funds that are registered with the OJK.

This study used the quantitative method. The unit of analysis was the organization, and the study object was the shares of companies registered with the OJK. The time dimension used was time series, which involves data collected over several years (2015-2018) that provides an overview of the development of an activity or situation. This research took place in 2019 and was conducted on Islamic money market mutual funds registered with the OJK between 2015 and 2018, with a total sample of 36 Islamic money market mutual funds.

This study used purposive sampling with the following criteria: Islamic money market mutual funds operating between January 2015 and December 2018 that their respective investment managers actively manage. The total sample obtained in this study was 36 Islamic money market mutual funds.

There is one dependent variable in this research, namely the Islamic money market mutual funds’ performance, and three independent variables: asset allocation policy, investment manager performance, and risk level. Data from funds used in this study were obtained from the official website of the OJK www.ojk.go.id by searching the financial reports, annual reports, and prospectus’ of each mutual fund registered with OJK between 2015-2018.

Mutual fund performance data collected included: 1.

Asset allocation, obtained from data on the proportion of assets, including sharia, Sukuk, and mudhabarah deposits, as well as return data from each asset

We accessed the website https://www.pasardana.id/fund/search and then filtered the type of “sharia”, currency “IDR”, and date (each month of 2015, 2016, 2017, and 2018). The search list was narrowed again by typing the specific name of mutual funds, which were: •

BNI-AM Dana Lancar Syariah

From this search, we obtained the “managed fund” and “participation unit” data for each month of 2015, 2016, 2017, and 2018 for every mutual fund that we listed. ²⁸

These obtained data were then tabulated in Excel and then calculated using SPSS. The asset allocation policy variable was measured using Sharpe’s Asset Class Factor Model, the investment manager performance using the Treynor-Mazuy Model, the level of risk using the Standard Deviation Formula, and the performance of the Islamic money market mutual funds using the Shape Ratio ( Table 1).

Data were tabulated for asset allocation policy variables by calculating the proportion of mutual fund allocation, the rate of return for each mutual fund, and error terms. Tabulated data for investment manager performance was obtained by calculating the return of the portfolio, return of risk-free assets, return for the stock market, and intercept that indicates stock selection from the investment manager. Tabulated risk level data was obtained by calculating return period-i, expected return, and the number of observations. Tabulated mutual fund performance data was obtained by calculating the Sharpe ratio value, the average performance of a certain sub-period Mutual Fund, the average risk-free investment performance of a certain sub-period, and the Mutual Fund standard deviation for a certain sub-period.

Data collection was carried out using the following stages: 1. Calculate the Asset Allocation Method with the following formula R it = b i 1 F 1 t + b i 2 F 2 t + b i 3 F 3 t + ε it x 1 = b i 1 F 1 t = Asset Allocation for Syariah mutual funds x 2 = b i 2 F 2 t = Asset Allocation for Sukuk x 3 = b i 3 F 3 t = Asset Allocation for mudhabarah deposits

Class Factor Model (Sharpe, 1995) Asset allocation policies were analyzed

R it = asset return i for t period

b i 1 = proportion for mutual fund i for asset allocation 1, namely syariah

b i 2 = proportion for mutual fund I for asset allocation 2, namely Sukuk

b i 3 = proportion for mutual fund I for asset allocation 3 yaitu mudhabarah deposits

F 1 t = return obtained from asset class index 1, namely ISSI in period t

F 2 t = return obtained from asset class index 2, namely the 12-month deposit interest rate in period t

F 3 t = return obtained from asset class index 3, namely the 3-month deposit interest rate in period t

ε it = error term (selecting process) including timing and stock picking

2. Calculate Investment Manager Performance using Treynor-Mazuy Model: R P − R F = α + β R m – R f + γ R m – R f 2 + ε p

R _p = Return of portfolio

R _f = Return of risk-free assets

R _m = Return for stock market

α = Intercept that indicates stock selection from investment manager

β = Regression coefficient of excess market return or slope when the market is down

γ = Regression coefficient that indicates the ability of market timing from investment manager

ε _p = error term

3. Calculate Risk Level using standard deviation: σ i = ∑ i = 1 n R i − E R i 2 N

σ i = Standard Deviation

R i = Return period i

E R i = Expected return

N = number of observations

4. Performance of Islamic money market mutual funds

Sharpe Ratio: S RD = Performance RD − Performance RF σ

S RD = Sharpe ratio value

Performance RD = the average performance of a certain sub-period Mutual Fund

Performance RF = the average risk-free investment performance of a certain sub-period

σ = Mutual Fund standard deviation for a certain sub-period

Hypothesis testing was carried out using Multiple Linear Regression Analysis (F test and t-test) to test the effect simultaneously and partially between variables. The data were tested using classical assumption tests (normality using the Kolmogorov-Smirnov test, multicollinearity using the VIF test, autocorrelation, and heteroscedasticity). The data were processed using SPSS software version 26.

Figshare: Dataset - F1000-109708.xlsx. https://doi.org/10.6084/m9.figshare.19241982.v2 ²⁸

This project contains the following underlying data: •

Dataset - F1000-109708.xlsx

(Data of Indonesian Sharia Mutual fund asset allocation, risk level, mutual fund performance, and investment manager performance for the last four years).

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).