The paper analyzes the returns earned by the sample mutual funds benchmarking with market return. It also assesses whether they are taking advantages of diversification, market timing and selectivity of securities to their investors. Secondary data of eight sample mutual funds’ have been used from 2015 to 2018 published by Nepal Stock Exchange and respective fund manager. Risk adjusted performance measures Jensen alpha, Treynor ratio and Sharpe ratio have been used to analyze return in terms of risk and Co-efficient of Determination (R²), Quadratic Regression of Treynor and Mazuy and Famade composition model are employed to assess diversification, market timing and selectivity ability of fund manager. The result explores that funds that are operated from 36 months over-perform benchmark market index and those funds operated for 16 months are suffering from very low return. Further evidence shows that low amount of diversification, moderate level of selectivity and no significant relationship between timing skill and return of funds.