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Maheen-Rahman

Immense growth potential in mutual funds

Interview with Ms Maheen Rahman — CEO, Alfalah GHP Investment Management Ltd

About Alfalah GHP Investment Management Limited:

The Company is licensed by SECP under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules). It was incorporated on October 18, 2004 as a public limited company under the Companies Ordinance, 1984. The sponsor of Alfalah GHP Investment Management Ltd is Bank Alfalah Limited. Other shareholders include GHP Beteiligungen Limited and MAB Investments Inc. At present, the company is managing total assets of PKR 50 billion (approx USD 474 million) through various mutual funds schemes and investment advisory mandates.

Assets under Management (PKR bn; Oct, 2013 – Date)

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The company has been rated as ‘AM2+’ by Pakistan Credit Rating Agency (PACRA). The rating reflects the company’s strong capacity to manage the risks inherent in asset management and the asset manager meets high investment management industry standards and benchmarks.

PAGE: YOUR VIEWS ON THE MUTUAL FUND SECTOR’S PERFORMANCE IN PAKISTAN:

MAHEEN RAHMAN: The mutual fund industry has shown strong growth over recent years where it has grown by a 3-year and 5-year CAGR of 12.43% and 10.60% respectively. It has managed to serve as a viable alternate source of investment that has managed to meet or exceed investor expectations, providing a one-stop-shop for most investor needs. The reliance on top notch industry leading professional human resource and improved customer support and relationship management, enhanced investor awareness due to marketing and distribution channel development, are few key factors that have helped the industry to achieve this growth. The overall performance of key mutual funds have broadly remained either in line with or have exceeded their respective benchmarks, allowing the stakeholders especially the small ticket investors to enjoy healthy returns. The constant innovation in product suite has also helped attract investors with varying risk appetites to choose from a product that suits their needs.

PAGE: YOUR COMMENTS ON THE AWARENESS CAMPAIGNS:

MAHEEN RAHMAN: We have recently seen awareness campaigns in Pakistan backed by Associations but in terms of actual awareness mutual funds are still at an infant stage. This trend needs to pick up here in order to allow general people to understand what mutual funds are and how they work. Various AMCs are actively arranging events and conferences in collaborations with PSX, MUFAP and CDC and they are attended by hundreds of potential investors, however, it is too early to analyze the effects on the sector.

PAGE: ARE THE FUNDS BEING OFFERED SUFFICIENT OR NEW FUNDS NEED TO BE LAUNCHED?

MAHEEN RAHMAN: There’s always room for new products based on the ever changing investment environment and economic outlook. Currently, most of the products being offered are sufficient, however, there’s always room for innovative products depending upon investors’ appetite. The investment avenues available to the mutual fund industry and those available in Pakistan can be broadly categorized into following segments:

  • Fixed income instruments
  • Equity market and related products
  • Real estate (REITs only for mutual fund industry)
  • Commodities

The current product suite offered by mutual funds capture the available avenues well with offerings that provide the investors with a balanced fusion of two or more investment classes based on the investors’ risk appetite.

PAGE: HOW COULD THE MASSES BE CONVINCED TO OPT FOR MUTUAL FUNDS? 

MAHEEN RAHMAN: Broadly speaking, the access to mutual funds by masses as an investment vehicle/avenue is still limited and there’s a great potential there to raise awareness and tap that segment of the market. Although the share of individual investors has risen exponentially over the past few years but the potential of growth in that segment is still tremendous. Effective marketing campaigns, admirable past performance, professional and dedicated management, transparency, ease of entry and exit coupled with access to small investors are some of the key USPs of mutual funds. Enhancement of their existing distribution network coupled with distribution partners can aid in a deeper market penetration. The fact that most notable AMCs have been around for over 10 years and most of them are backed by financial institutions that enjoy a strong footprint in the country, are factors that act as a confidence booster for the masses.

PAGE: YOUR COMMENTS ON REGULATION AND TAXATION FOR AMCS:

MAHEEN RAHMAN: The industry is heavily regulated with the SECP playing an active role in development of rules and regulations and adapting to the changing investment and economic scenario having its focus on safeguarding the investors’ interest along with helping the industry achieve a broader base and explore the potential growth in the sector. Over recent years, the role of the regulator has been forthcoming in reference to development and implementation of effective procedures and product development. Further, the SECP has been very supportive by providing incentives to asset management industry for expanding retail outreach including setting up branches in second tier cities. Mutual fund investors also enjoy various tax incentives as per existing Income Tax laws. Major incentives include, the income of the mutual funds is exempt from Income Tax if profit for year is distributed to investors in the form of dividend. Further, the individual investors of mutual funds are also allowed tax rebate on their investment in mutual funds in case they hold their investment for certain period of time.

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