ATLAS ASSET MANAGEMENT LIMITED
June 05 - 11, 2006
Atlas Asset Management Limited (AAML), sponsored by the Atlas Group of Companies was incorporated in 2002 as an asset management company and investment adviser in collaboration with ING Institutional & Government Advisory Services B.V., a company incorporated in the Netherlands.
ING Investment Management is a global asset manager with Euro 500 billion assets under management with a direct presence in 28 countries including 12 countries in Asia.
ING not only has representation on AAML's Board of Directors but it also plays an integral role in helping AAML, inter alia, with product development, enhancement of investment processes and staff training.
AAML strives to be a market leader in providing quality fund management services with customer satisfaction as its primary goal. In order to achieve this vision, AAML is committed to offering its investors the best possible returns on a diverse range of products to meeting not only the customer's current requirements but also exceeding their future expectations.
The Pakistan Credit Rating Agency (PACRA) has assigned an asset manager rating of "AM3+" to the Company. In PACRA's words the rating reflects "the company's strong capacity to master the risks inherent in asset management and the asset manager meets high investment management industry standards and benchmarks."
AAML currently manages three funds, two of which are open end, Atlas Income Fund (AIF) and Atlas Stock Market Fund (ASMF) and the third is a closed end fund, Atlas Fund of Funds (AFF). In a span of just over two years, AAML has already accumulated assets under management of Rs. 4.9 billion. Moreover, both Atlas Income Fund and Atlas Stock Market Fund, have been assigned a "4 Star" fund rating by PACRA. The ratings reflect "a good performance relative to peers."
AIF, the first open-ended mutual fund of the company, was offered for public subscription on a continuous basis from March 22, 2004. AIF currently has assets under management of Rs. 2.7 billion. The principal activities of the Fund are to make investment primarily in reverse repurchase transactions of listed equity securities, fixed rate corporate debt instruments, Government securities and other money market instruments. This fund is designed for investors looking for a diversified exposure in a low risk asset class. AIF is one of the best performing funds in its class and posted a return of 9.75% for the fiscal year 2005. This year the performance has again been impressive and the management is projecting a return in excess of 11% on an annualized basis.
ASMF, the second open-ended fund of the company, was offered for public subscription on a continuous basis from November 23, 2004. In less than two years, ASMF has accumulated assets under management of Rs. 1.6 billion. ASMF aims at achieving a good rate of current income consistent with the prospects of appreciation in the value of amount invested. The fund is designed for risk conscious investors seeking equity exposure and a strong focus on investment growth. ASMF has outperformed most of its peers in its asset class and the returns this year as of June 1, 2006 stand at 34.88%.
AFF, the third fund of the company and the first of its kind in Pakistan, is a closed-end fund. This fund was launched in December 2004 with a paid up capital of Rs. 500 million. AFF is listed and traded at the Karachi Stock Exchange.
This fund has a unique investment strategy in that it passes on the benefits of price discounts to its investors. The capital of the fund is invested in shares of closed-end mutual funds listed on the stock exchanges in Pakistan. The objective of the fund is to take advantage of the discount at which closed-end funds are traded on the stock exchange and post a higher return to the shareholders. The purpose of introducing AFF is to provide investors a one-window facility to invest in diversified portfolio of equity securities of closed-end schemes offering consistent returns and growth. The fund has performed credibly and the Net Asset Value (NAV) performance (incorporating the effect of NAV of investee funds) as of June 1, 2006 stands at 24.40%.
AAML takes prides in its human resource. The company has a dedicated, experienced and professional work force led by the Chief Executive Officer, Mr. Habib-ur-Rahman. Mr. Habib-ur-Rahman is an FCA from the Institute of Chartered Accountants in England & Wales. He worked for the National Investment Trust Limited from 1971 to 1981 as Head of Investment and Finance. Moreover, he played an instrumental role in setting up the first open-ended mutual fund, ABAMCO, in the private sector in Pakistan and was the Chairman & Chief Executive till January 2004. He was a founding member, and Vice Chairman of the Mutual Funds Association of Pakistan. He has been SECP's nominee on the Board of the Karachi Stock Exchange in 2000, 2001, & 2003 and a member of the SECP Advisory Group on Capital Markets.
MUTUAL FUND INDUSTRY
There has been impressive growth in the mutual fund sector in the last couple of years. Assets under management have grown considerably as have the number of funds coming into the market. According to Mutual Fund Association of Pakistan (MUFAP) there are twenty eight asset management companies in Pakistan of which twenty seven are registered members. The twenty seven member companies are currently managing forty six funds - twenty closed end funds and twenty six open end funds with total net assets of Rs. 50 billion and Rs. 125 billion respectively. The private sector is playing an increasingly prominent role in the sector and currently about 50% of the total industry size of approximately 175 billion is with private sector asset management companies with NIT holding the remaining 50%. However, with the impending privatization of NIT the mutual fund industry will become the exclusive domain of the private sector.
The increasing innovation in products is helping to cater to the requirements of all types of investors - risk averse, return orientated as well as Shariah compliant investors now having a large array of products to choose from. Moreover, the State Bank of Pakistan now allows mutual funds to invest 30% of their assets abroad or US$ 15 million (whichever is lower). This initiative will allow fund managers to diversify their portfolios which will mitigate risk and enhance investor confidence in mutual funds.
The SECP has set up a stringent regulatory framework for the industry and with the forthcoming amendments in the NBFC Rules the regulator is likely to become more vigilant in light of the ever increasing number of mutual funds and Asset Management Companies (AMCs) coming into the market. The mutual fund industry already meets stringent standards in terms of how funds conduct their business. For example, it is mandatory for all asset management companies and their funds to acquire a rating, while weekly reporting of assets and liabilities of funds is also required. Moreover, the trustee structure, governed by the NBFC Rules 2003, ensures that the custody of all assets in the funds is held with the trustee on behalf of the investors. The trustee structure provides yet another independent safeguard for the investors.
Despite the exceptional growth and strong regulatory presence, Pakistan's mutual fund industry is still in the early stages of development. Thus far AMCs have successfully tapped the corporate sector but the vast potential in the retail segment has been largely untapped. Presently, many investors, individuals in particular, are satisfied with placing their savings into bank accounts. Returns from bank deposits are well below the prevailing inflation rate. In real terms, therefore, bank deposits are providing negative returns, which in turn dilute an investor's purchasing power. The vast majority of income funds in the market, which have a low risk low return mantra, are offering returns of 2-3% above the prevailing inflation rate, which is even greater with the added tax benefit that mutual funds enjoy.
Mutual funds are particularly beneficial for individual investors. One can invest with as little as Rs. 5000 and realize an investment goal which individual stock picking investors can only achieve with a sizeable investment spread across various sectors - diversity. Moreover, investments in open end mutual funds can be liquidated within 6 working days of redemption without fear of lower locks, an added benefit for financially constrained investors.
At present, assets in Pakistan's mutual fund sector are a mere 6% of bank deposits, while in India and the United States they make up 13% and 150% of bank deposits respectively. It is evident from these figures that mutual funds remain an esoteric investment product for most Pakistani investors and the Mutual Fund Association of Pakistan (MUFAP) with requisite support at the regulatory level needs to initiate a cohesive investor awareness program in order to educate investors about the benefits of investing in mutual funds.
While most institutional investors in Pakistan have some understanding of the benefits of investing in mutual funds, there is a long way to go before mutual funds become a regular source of investment for those who will truly benefit from it - the individual investors.