INTERVIEW: TARA UZRA DAWOOD

CEO DCM talks about investment options & Opportunities 

SADAF AURANGZAIB
July 30 - Aug 05, 2007

No one can deny the importance of investment in short term and long term instruments, but to judge as to where to invest in is the major barrier in polarizing public opinion. PAGE on its behalf tried to take opinions of those people who have made their own mark in the industry. One of them is Dawood Capital Management Ltd (DCM). It is an Asset Management Company, a provider of investment advisory and asset management services. PAGE had the opportunity to talk to Tara Uzra Dawood, the CEO of DCM about the investment opportunities that are prevailing in the current atmosphere.

PAGE: How do you define the concept of saving and investment?

TUD: Investments can be short, medium or long term and are usually for the purpose of increasing one's finances.  Savings, however, is usually a longer-term concept and is more a commitment to building financial reserves for oneself or one's family.

We at Dawood Capital Management Ltd. (DCM) specialize in both savings and investments.  We have a range of investments in our funds and are an investment advisor.  Further, DCM is the Nation's Premier Savings Option and offers BABYFUNDTM, LADIESFUNDTM and SHAADIFUNDTM savings plans for individuals to help ensure their financial security.  We highly recommend a monthly savings plan (which we call INSTASAVETM), particularly automatic withdrawals from your paycheck or bank accounts, so that the money will be taken out before you really have access to it. In the meantime, it begins to compound and you don't miss the money. Human nature is such that we are very adaptable. If you don't have the cash, you'll find a way to get by without that money and after awhile, you likely won't miss it!

PAEG: Running a team of professional fund managers, what is your thought on active investment opportunities and returns, what is the safe investment?

TUD: The 'safe' investment avenue in Mutual Funds has to be the Money Market and Income category of Mutual Funds. These funds are entirely invested in fixed income products, that is to say, that the return expected is a 'known' item at the time of investment. By 'known' I mean that the money is invested in instruments for a fixed-rate of return.  Fixed income is a category that even the State Bank of Pakistan, in Prudential Regulation R-6 acknowledges as a low-risk. The returns from such an investment will be greatly dependent on what the Money Market rates stand at, namely the 6 month KIBOR. Generally, and historically, these funds target and usually beat inflation.

PAGE: The layman thinking is to get big benefits out of small investments; do you think it is right to think that way?

TUD: It is not just the layperson that looks for these opportunities, but established investors as well. In most developing nations, there is almost always the same prevailing attitude of 'getting rich quick.' The difference is that professional investors can often identify the risks involved for such a venture far better than the layperson. It is at this point that often the layperson gets hurt by various 'scams' that have been around in most developing nations, not just Pakistan. As time goes by in these countries, Mutual Funds often arise, as is the case now in Pakistan, and these are exactly the investment vehicles that the layperson should be investing in. It is often the most cost effective way of obtaining professional investment advice and avoiding the pitfalls of direct investment.  Experienced financial advisors and fund managers, such as our DCM team, have made a career out of getting maximum benefits out of all investments.  

PAGE: Which investment gives the highest rate of return and how much risk is involved in such investments?

TUD: This is like asking 'how long is a piece of string?' The investments carrying the highest risks generally have the POTENTIAL for highest return. Traditionally in Pakistan, land has been an area we like to invest in, but often people make the mistake of calculating their 'return' without seeing what the alternative opportunities were at the time of investment and how these have performed. Also, land is not quite easy to shift at short notice and involves a heavy discount if the funds are needed quickly for some reason. Perhaps the right question here is the 'risk-adjusted rate of return.' Again here, I would say our INSTASAVETM options provide a very good investment opportunity for investors while allowing them access to their money at short notice.

PAGE: Which are the areas where a person should invest in order to better keep up with the liabilities of the family and maintaining the lifestyle after getting retired?

TUD: There is the saying, 'rot', kapra, makaan'. I would add 'taleem' to this. All families look to better themselves from the previous generation, and these days education is the optimal avenue towards betterment. Generally, this concept is understood better in the West, where a child's education is central to any family's savings plan. Investing in one's child's education, as well as savings for their health care and marriage, is a must for all Pakistanis.  That is why we have launched our DAWOOD BABYFUNDTM children's trust funds to promote financial security of the children in Pakistan.  Once you can get your child to stand on his or her own two feet, financially speaking, you are in a far better position to think about your own financial future in your golden years.

PAGE: What should be the short-term and long-term investment plan of an individual to better keep up a balance in his life?

TUD: This would greatly depend on the individual investor. Every person has a different outlook on life, and some are risk takers and some are risk averse. Lost money can be recovered, lost time can not.  If I was to generalize this answer, I would say, the younger you are, the fewer 'responsibilities' you have, the more risk you can take. You have a greater time horizon to recover from a loss you might take. As you mature, your priorities shift towards your family life, and you normally become more risk averse.  We at DCM, have investment plans to suit all investor categories.

PAGE: How many options are there to help make a sound judgment in that regard?

TUD: Pakistan's investment opportunities are growing very rapidly. This is seen by the growth of investment opportunities available in the Mutual Fund industry. The professional investor, usually corporate, will have a team of advisers to guide them. For the lay person, they should look at the rating of a fund. Both PACRA and JCR-VIS assign ratings to investment opportunities. These are based on past performance, management quality, asset quality etc. The layperson is already being guided towards a sound judgment, whether they choose to accept this guidance is another matter. Go for a top rating, 5-star or equivalent, such as Dawood Money Market Fund.

PAGE: How much does a good portfolio help in achieving a better rate of return, or is it just prone to the market stability?

TUD: The asset allocation of a portfolio is critical to the Fund's success.  That is why looking at a Fund's track record is key to deciding whether it is an ideal investment.  While markets always go up and down, an experienced Fund manager typically has the ability to better see any early signs of market movement and the contacts and flexibility to adjust the Fund in most case scenarios.  For example, Dawood Money Market Fund now has a four year track record of consistently being a market leader.  The mutual fund industry is a very quantitative one where performance is usually easily judged simply by looking at the numbers.

PAGE: There are some traditional and orthodox ways of saving money in our society like investing in gold jewelry etc, how effective do you think these kinds of investments are; what could be a much better option available for a woman of today?

TUD: Investing in Gold jewelry brings about a security risk. If you keep the jewelry at home, you are taking a risk. If you try and mitigate this risk at home, you have to factor in the cost of security firm/chowkidar you are hiring to protect your home. Similarly, if you go for a vault, you have to factor in the cost of the vault. By investing through INSTASAVETM, your money is growing steadily over a period of time and you avoid the security risk.  Further, with our DAWOOD SAVINGS FUNDSTM, you can start investing for as little as Rs. 500 and so is an ideal way for you to grow and save your extra money.

PAGE: What sorts of funds are available in the market to invest in and which are the best ones with regard to the rate of return and negligible risk attached?

TUD: Money Market, Income, Capital Protected funds including the 5 star rated Dawood Money Market Fund -- offer the best avenues for investment with negligible risk. But again, always check the ratings. 

PAGE: It is also said that the best investment is the investment made on the human resource development as in that way you will get the highest rate of return, how sound is this judgment?

TUD: Certainly at DCM and First Dawood Group, our people by the grace of Allah are our greatest asset.  Their determination, dedication, creativity and hard work, along with their commitment to superior customer service, are the heart of our success.  Our team's knowledge and experience in the market, as well as continued commitment for being savvy to market changes, has helped us to ensure consistently leading returns.  Our four year income fund Dawood Money Market Fund continues to be 5-star rated by PACRA and is the number one performing rated income fund in Pakistan.  This would not have been possible without our talented team.

PAGE: What advice would you like to give to our readers on how and where to invest their money?

TUD: There are many options for investment available to your readers, depending on their risk profile needs.  For individual investors who are new to the market, we recommend our Dawood Money Market or Islamic Funds. For investors saving for a specific goal, BABYFUNDTM, LADIESFUNDTM and SHAADIFUNDTM all offer conservative investment opportunities to the new investor.

WHERE TO INVEST YOUR SAVINGS ?

This is one of the most frequently asked question. To give a direct/short answer, following are some avenues for investment of your savings :

INVESTMENT IN REAL ESTATE :

* Good returns expected in the long run, as property prices are generally increasing every year.

* But it is speculative and a rising curve is not assured.

* In case of need, it may be difficult to encash your savings, as it may be difficult to find a good market price or you may not find a buyer at all, at a given time.

* If market remains depressed and prices go down, you may even lose part of your principal investment.

INVESTMENT IN CAPITAL MARKET/STOCK EXCHANGE :

* Recent record shows attractive returns/yield on investment in shares or mutual funds.

* But it is speculative by nature; neither the profit (dividend) nor capital appreciation is certain, as market moves both ways.

* Therefore, return of even the principal investment is not assured.

DEPOSIT IN A CONVENTIONAL BANK :

* Although returns are not assured, a certain rate of return can be expected/anticipated, looking at the past trends.

* Principal investment is almost guaranteed, barring any unfortunate insolvency of the bank, which is a rarity or very remote possibility.

* Returns are not considered 'Halal' in the strict Islamic sense.

DEPOSIT IN AN ISLAMIC BANK :

* Although returns are not assured, as it is decided on the basis of actual profits earned, a certain rate of return can be expected/anticipated, looking at the past profitability trends.

* Principal investment is almost guaranteed, barring any unfortunate insolvency of the bank or unprecedented losses, which is a rarity or very remote possibility.

* Return/Profit is considered 'Halal', since the Islamic Banks strictly observe Shariah-compliant banking principles and operate under close scrutiny of Religious Scholars or Shariah Advisors and the State Bank's Islamic Banking Dept.

AlHamdo Lillah, now there are quite a few full-fledged Islamic Banks in the market and some conventional banks offering Islamic Banking, to choose from. This week we briefly introduce one such Islamic Bank, AlBaraka Islamic Bank (AIB) :

* Operating as a full-fledged Islamic Commercial Bank in Pakistan since 1991.

* Existing branch network of 11 branches, in Karachi, Lahore, Islamabad, Rawalpindi and Faisalabd.  Planning to open 7 new branches during 2007, with branches in Abbottabad and Peshawar opening very shortly.

* AIB Pakistan has consistently shown profits through the years and has accordingly been distributing very competitive/handsome profit amounts to its depositors, through its wide range of deposit products to suit all types of investors.

* AIB Pakistan has consistently been rated high; present entity rating by JCR-VIS is 'A-1' for Short Term and 'A' for Long Term, with 'Stable Outlook'.

* AIB Pakistan has its Head Office in Bahrain, which is a part of Albaraka Banking Group (ABG).

* ABG has its 10 banking subsidiaries spread out internationally in Bahrain, Jordan, Kuwait, Egypt, Lebanon, Algeria, Sudan, Tunis, Turkey and South Africa. Its annual accounts at 31 Dec. 2006 report a network of 215 branches, Equity of about US$1 billion and an Asset Base of US$7.6 biilion.

* ABG, in turn, is part of the giant conglomerate, Dullah-Albaraka Group of Saudi Arabaia with interests in Banking, Finance, Insurance, Media, Aviation, Education, Tourism & Hotel industries etc.