During the financial crisis, many mutual funds lost a large portion of their value, as they could not withstand the violent fluctuations in the market. Each of them began to recover step by step, but with different timing, some of them recovered quickly, and some recovered slowly. Mutual funds managers, aiming to withstand such fluctuations during the crisis and recover quickly, tried to save and keep funds' entities stable amid the anticipation of investor events. Losses are painstaking, costly, and deadly, and they sometimes force investors out of the market altogether.

Specifically, the thesis aimed at finding a new methodology to protect the assets from the volatility of the markets through during periods of global economic collapse by the hedging strategy, this strategy build-in using the Islamic hedge methodology to save minimum level of the return through using the Bai-Salam contract to be an essential portion in the Islamic mutual funds, consequently, build simulation fund which has Baisalam contracts as a hedging instrument to change in the perform of this
simulation fund and study this changes in the financial crisis recovery period. Consequently, this thesis is interested in exploring the effect of the Islamic hedge funds on the effectiveness of sharia-compliant mutual funds primarily in the financial crisis recovery period, and not only that, but from the funds that will recover quickly. This research aims to study the effect of Islamic hedge funds on the performance of Islamic mutual funds.

In another way, in case those sharia-compliant mutual funds contain some stocks from Islamic hedge funds, will they help protect mutual funds (assets) from losses in times of crisis recovery period, and can they thus be used as hedging tools? In such a case, investors and fund managers can use them to ameliorate the yields of mutual funds by decreasing losses to protect assets' value from fluctuations, offering a practical solution to protect financial assets. They will also attract investors to invest in mutual funds because they will become safe investments during periods of fluctuation and after a crisis to stand up quickly again, as hedge funds
secure them. Hedge funds had presented high-performance returns since 1949 when they first appeared after Alfred Winslow Jones proposed the initial idea and developed the first hedge fund and thus invented a new mechanism for investors to gain billions. The hedge fund is an investment pot that includes a number of shares, generally more than five hundred investors. They usually require a substantial amount of money to participate in the fund, ranging between half a million and a million dollars minimum and, in some cases, a minimum of five million USD, as in the case of the Tiger Fund (Pacelle, 1998a). The philosophy of the hedge fund
is based on ensuring profit for the investor, regardless of the fluctuations that may occur in global markets. There are no restrictions on the fund manager from the regulator's side, which is considered an advantage.

This thesis will evaluate the performance of 200 sharia-compliant mutual funds and the simulation fund which consists of 200 Islamic mutual funds plus 50 sharia-compliant hedge stocks and do a comparison of performance between the two types of funds, using the net asset value (NAV) monthly. As methods, it uses the capital assets pricing model (CAPM) and its ratios (i.e., the Treynor measure, Sharpe measure, Jensen measure, Modigliani and Modigliani RAP measures, and Treynor-Mazuy measure), the Fama and French three-factor model (Fama & French, 1993), and the Carhart four-factor model Carhart (1997) towards investment border for countries in the Asia Pacific region, ten countries Bahrain (1), Hong Kong (1), India (4), Indonesia (15), Kuwait (6), Malaysia (107), Pakistan (17), Saudi Arabia (46), Singapore (2), United Arab Emirates (1). This thesis covers the period from April 2009 until April 2019 with 121
observations every month, which represents four periods: Total period from (2009-2019), the first phase of the recovery period from (2009-2010), the second phase of the recovery period from (2011-2012), the third phase of the recovery period from (2013- 2019). This thesis seeks to answer some questions to prove its hypotheses to examine the effect of the hedge funds/stocks or by the minor questions to explore the impact of the Bai-Salam contract, the timing and selectivity skills, systematic risk, size, value, and momentum risk premiums on the performance of mutual funds. The research is quantitative with exploratory and descriptive elements for the purpose and deductive logic and quantitative aspects for the process, which are applied for the results; finally, a cross-sectional design is used for the time horizon.

The thesis findings illustrate the comparison between the Islamic mutual funds (IMFs) results and the simulation fund. The simulation fund has outperformed the IMFs in all intervals by comparing it with the IMFs. I conclude that phase one (2009-2010) is the best phase in which the simulation fund outperformed the IMFs according to mean, Compound annual rate return, Treynor measure, and the Sharpe measure. Still, according to the Fama measure, the IMF outperformed the simulation fund at this phase. Phase two (2011-2012) is the best phase in which the simulation fund outperformed the IMFs per Beta and Treynor-Mazuy measure.

According to Jensen alpha measure and M squared measure, phase three (2013-2019) is the best phase in which the simulation fund
outperformed the IMFs. In contrast, alpha was 1.1 for the simulation and 0.62 for the IMFs, in addition to M squared measure was 0.6 for the simulation and 0.5 for the IMFs. From this comparison, we can derive a conclusion that the simulation fund outperformed the IMFs in the most challenging period, which is characterised by a flop in decisions, the absence of a vision, a mass exit from the market randomly, and a general fear of entering into new investments.

It is essential to know that the thesis added a new risk management approach in using the Bai- salam contract as a derivative tool or hedge tool not only as a finance or investment tool. It has added a new Bai –Salam contract through the period of thesis April-2009 until April 2019. It is developing new applicable methodology in how to convert the regular Islamic stocks to Bai- Salam contracts. New data added to the literature for two hundred Islamic mutual funds from ten regions from April 2009 until April 2019. New data added to the literature for fifty Islamic stocks in Malaysia From April 2009 until April 2019, and data for the fifty Bai-Salam contracts after converted from the Malaysia Islamic stocks at the same period from April 2009 until April 2019, also added the statistical analysis for all the data through four periods to cover the financial crisis recovery periods. A new approach in how to build a simulation fund and
using the Bai-salam contracts as an influencer the IMFs performance. Find a new relationship between the IMFs and Bai-Salam contracts. Find new data for the Islamic fund consists of homogeneous and different stocks added to the literature. A new approach in using the Islamic risk-free rate in the CAPM model and in its ratios to become all the CAPM model variables are Islamic.