INTERVIEW: NAJAM ALI, CHIEF EXECUTIVE OFFICER JS ABAMCO

Mutual funds well poised to grab a major chunk of bank deposits; banks taking depositors for a ride

AMANULLAH BASHAR
Apr 02 - 08, 2007

Najam Ali joined JS ABAMCO Limited (formerly ABAMCO Limited) as Chief Executive Officer in 2004. Prior to his present assignment, he was the Executive Director and Head of the Non-Banking Finance Companies Department at the Securities & Exchange Commission of Pakistan (SECP).

He carries an in-depth exposure to a variety of products in asset management as he was involved in regulation, monitoring and enforcement for mutual funds, leasing, housing finance, investment banking. venture capital and discounting, companies while working with SECP.

Najam also served for seven years as the founding CEO of the Central Depository Company CDC), which is Pakistan's only securities depository established by Citigroup, IFC and Pakistan's stock exchanges, While at CDC, he also led the development of the National Clearing and Settlement System, a centralized clearing system in Pakistan for all the stock exchanges.

The success of these projects has laid the foundation of a world class capital market infrastructure that has made it possible to settle enormous trading volumes witnessed in recent years. It was due to his leadership role in the development of Pakistan's Capital Market that has earned him praise and recognition at the national level. His name has been included in the list of Top Ten Capital Market Builders in Pakistan by a contemporary financial magazine.

Najam carries the distinction of working in various positions at the Fidelity Investment Banking including Group Financial Controller and Head of Money and Capital Markets. He has also worked with. Robson Rhodes, Chartered Accountants, a member firm of the RSM Group in the UK to his professional career.

He serves on the Boards of Directors of Askari Commercial Bank Limited. Pakistan Oilfields Limited, Dadex Eternit Limited and has also previously been a director of the National Clearing Company of Pakistan Limited and the Karachi Stock Exchange (Guarantee) Limited. He is currently serving as the chairman of Mutual Funds Association of Pakistan.

Talking to Pakistan & Gulf Economist, Najam Ali looked quite confident with the outlook of the Mutual Funds in Pakistan with an interesting remarks that days are not far away when Mutual Funds by offering more attractive and innovative products would be giving a real tough time to the banks in Pakistan. While elaborating his point of view, Najam was a little bit critical over the role of the banks and the way they are treating with the depositors. In fact they are taking the depositors for a ride without offering positive or reasonable returns to the depositors. In fact, banks are mostly confined to lending and borrowing in general. Najam rightly pointed the monotonous role of the banks, as generally speaking their interest is to enjoy the pudding of lucrative spread between deposits and lending.

When National Saving Scheme drew his attention towards attracting offers, Najam once again called it an intervention on the part of the government, which sounds contradictory in a liberalized financial regime. Actually, the market forces should determine the price or return on investment instead of intervention by the government especially in the case of NSS. Let the entire player compete in a healthy environment by providing a level playing field to all the stakeholders, he observed.

ABAMCO

Looking comfortable as the chief of country's most prestigious asset management company Najam proudly mentioned that ABAMCO enjoys number one position in Pakistan, which has also been ratified by PACRA rating of AM2+, no other Mutual Fund enjoys this rating, he said with a sense of achievement.

JS ABAMCO is first and one of the largest asset management companies in the private sector managing over Rs22,618 million as on June 30, 2006 in investments on behalf of institutions and individuals. At present, ABAMCO is managing seven open-end and three closed-end funds. The total net assets of the 7 open end and three closed end funds amounted to Rs11,886 million and Rs10,732 million respectively on June 30, 2006.

Though the Mutual Fund sector was still in its initial stage yet it is well poised to gain momentum especially on the back of economic growth the country has witnessed during past three four years and a strong outlook for future. He however drew a line between economic growth and economic development. Explaining his point of view, Najam no doubt that economy of Pakistan has been witnessing tremendous growth in recent years, however when we look at economic development that is not so reassuring owing to lack of direction and restructuring in the major economic sectors like agriculture and manufacturing sectors except automobile and telecom sectors which have shown noticeable development.

While taking stock of economic growth in Pakistan, Najam was of the views that growth starts taking place in our country whenever our relations with the United States and other developed countries in the West are congenial which gives a pattern that our economy is more politically based rather than knowledge and skill based economic development.

Coming back to the performance of different products in Mutual Fund sector Najam said that actually it is the market demand, which sets the way for the fund managers. In this backdrop, currently there is a growing interest and demand in Islamic or Shariah complaint financial products. This area is taking shape in Pakistan as well as. Responding to the market needs, ABAMCO developing Pakistan's first Shariah Compliant Index Fund to be launched on the back of the recently announced Dow Jones- JS Pakistan Islamic Index Fund under a licensing agreement with Dow Jones and JSCL. Another product is recently launched which is a low risk capital protected fund UTP Capital Protected Fund the fund is launched with a leading International commercial Bank having an extensive branch network in Pakistan. ABAMCO is also researching various concepts in the Income and Money market Fund categories.

When asked to comment on the concept of Fund of the Funds, he said currently only two such funds are in the market one of which initiated by ABAMCO. Outlining the concept of this fund, Najam said actually this is a unique product and instead of investing else the managers of this fund look at the performance of different funds and make their investment in the fund of the funds. It is also in the initial stages and certainly capable to harvest a rich crop in the days to come, he remarked.

MARKET SIZE

While commenting on the size of the mutual fund regime in Pakistan, Najam said currently around 50 Mutual Funds are in business while a few more are in he process to come on line. However this sector was still in its early age when quantify its size it comes at 2.3 percent of the GDP and hardly carries 5 percent of the total deposit base of the banking sector.

One of the most significant factors, in his point of view, was the arrival of the best human resource in this sector. He said without any fear of contradiction that at present the asset management sector has the cream of the available human resource in Pakistan. When asked to give the reasons why high skilled manpower is being attracted by the Mutual Funds? Well it is attributable to high ruminations and of course

Since he hails from SECP by virtue of his past association, he had a soft corner for the commission and looked quite positive about the role of SECP as the APEX regulator of the capital market.

PROSPECTS

Pakistan's mutual fund industry is witnessing unprecedented growth owing to upturn in the country's economy and being Pakistan's largest private sector asset management company. JS ABAMCO is well poised to take advantage of this growth cycle. The sector shares approximately 16.52 percent of the nation's total savings, a lot less compared to other developing and developed countries, thus representing a huge potential to grow even further. ABAMCO has some expansion plans with the objectives to:

a-Further improve market share
b-Increase its outreach to a regional level
c-Lower business risk
d-Make the cost structure effective and efficient
e-retain and attract talent.

Najam said that ABAMCO is intended to launch itself globally by opening an international subsidiary to be based in Dubai, with the permission of SECP. Initially this office would focus on developing a very strong distribution network in the Middle East through the foreign and local banks in the region. We expect our initial investors to be focused on gaining exposure to our current product range focusing exclusively on Pakistan owing to our credible corporate reputation and continued success in delivering on promises. ABAMCO also intended to use Dubai as the base to actively market Shariah complaint funds to a huge array of Shariah compliant Fund Managers across the globe.

GULF REGION

Subject to approval by SECP and the relevant regulatory authorities, JS ABAMCO will offer new products mentioned below in Gulf Region:

-Index Fund, Sector Funds, Exchange Funds, Quantitative Funds, Commodity Funds, Real Estate Funds, Infrastructure Funds, Currency Funds.