MUTUAL FUNDS OFFERINGS ON THE RISE IN FY0...

Appropriate measures should be drafted for the individuals and corporates to attract them for investments in mutual funds.

MARIRAM NASIR, Manager Research
Apr 02 - 08, 2007

Mutual funds captured public's attention in Pakistan in the last decade when mutual fund investment hit record highs and investors witnessed incredible returns. In 2002, there were only two companies National Investment Trust (NIT), the biggest and the oldest, which represented the public sector; and the second and the only one operating in the private sector was ABAMCO. Later on Arif Habib Investments joined the league of the leaders and by now total number of asset management companies operating in Pakistan has reached 28 with funds under management crossing 60. This gives a fair idea about the pace of development and expansion in this particular field. This growth continued in the year FY07 (July 2006 March 2007), where in total seventeen funds were launched/listed out of which 14 were open end and 3 were closed end. Amongst the open end fund four were Islamic Funds. During the year, Pakistan made its first portfolio investment abroad by launching the Pakistan International Element Islamic Fund (PIIF). The fund is managed by Arif Habib Investment Company Limited. This investment symbolized a major step forward for the country's economy. A country which was in not too distant a past considered a basket case country has now acquired the confidence to take advantage of opportunities available in leading international financial markets. As per different asset management companies they have plans of launching more fund in the fiscal year. Some of the funds were launched by the newly established asset management companies i.e. MCB Asset Management and HBL Asset Management Limited.

OPEN END MUTUAL FUNDS:

S.#

NAME OF THE FUND

ASSET MANAGEMENT COMPANY

1

AKD Income Fund

AKD Investment Management Limited

2

AMZ Plus Stock Fund

AMZ Asset Management Limited

3

Atlas Islamic Fund

Atlas Asset Management Limited

4

HBL Income Fund

HBL Asset Management Limited

5

KASB Stock Fund

KASB Funds Limited

6

MCB Dynamic Cash Fund

MCB Asset Management Limited

7

MCB Dynamic Stock Fund

MCB Asset Management Limited

8

Meezan Islamic Income Fund

Al-Meezan Investment Management Limited

9

Nafa Multi Asset Fund

National Fullerton Asset Management

10

Nafa Stock Fund

National Fullerton Asset Management

11

Pakistan Int. Element Islamic Fund

Arif Habib Investment Management Limited

12

Reliance Income Fund

Noman Abid Investment Management Limited

13

United Composite Islamic Fund

UBL Funds Limited

14

United Stock Advantage Fund

UBL Funds Limited

CLOSED END FUNDS:

S.#

NAME OF THE FUND

ASSET MANAGEMENT COMPANY

1

BMA Principal Guaranted Fund

BMA Asset Management Company Ltd

2

NAMCO Balanced Fund

National Asset Management Company Limited

3

WE Balanced Fund

WE Investment Management Limited

The performance of the mutual funds industry has generally kept pace with the performance of the stock market. During the past 3-4 years, the stock market in Pakistan have performed well and if they continue to perform better and attract investment more and more corporate and small investors would venture into the business, which is also a precursor for better future prospects of mutual funds industry in Pakistan. However the industry witnessed various hiccups during the current financial year which included upward revision in rate of National Saving Schemes and imposition of stamp duty on trading of shares in ready market. The NSS Reforms are going to have a detrimental effect on mutual funds industry as the pie of any mutual fund is made of either purely money market, debt market, equity market or a mix of all as per its investment objective. No doubt a mutual fund offers convenient and cost effective method of obtaining diversification and professional management and is being regulated by strict rules and regulations under the auspices of administrative agencies and subject to frequent reviews by various advisors and rating agencies yet still if the size of the pie is shrinking this is going to take a hit at mutual fund industry and asset management companies nonetheless.

FUTURE OUTLOOK

Even though more and more asset management companies are venturing into this business but if we compare investment in bank deposits including national saving schemes to investment in mutual funds, then it hardly crosses five percent which is way behind our regional and global counterparts. Looking at our neighbor India, its investment in mutual funds to bank deposits stands at around ten percent whereas in America the mutual funds investment exceeds the total bank deposits. There is a great potential of mutual fund in our society, so only there is need to educate our society and to bring the people in this loop. Recently some television channels have started very good programs for the awareness of businessmen and common public but people are ignorant about mutual funds as the language and terminology used by media is incomprehensible for the lay man. Hence appropriate measures should be drafted for the individuals and corporates to attract them for investments in mutual funds.