NIT: THE LARGEST AMC OF PAKISTAN

RETAINING THE TOP POSITION HAS NOT BEEN AN EASY TASK.

SHABBIR H. KAZMI
(feedback@pgeconomist.com)

May 28 - June 3, 20
12

Established in 1962 National Investment Trust (NIT) has emerged as the largest asset management company (AMC) of Pakistan. Though it has floated various types of funds, it remains the largest investor in the shares of listed companies. Managing such a large portfolio has never been an easy task. NIT's endeavor can be summed up in one sentence 'retaining the top position has not been an easy task and there is no room for complacency'.

There is huge potential for growth because total assets under management of the mutual fund industry in Pakistan is around six per cent of bank deposit, a miniscule amount when compared to the global average.

Its initial mandate was to take up a specific percentage of every initial public offering (IPO) for the growth of capital market as well as distribute good return among the investors. Its claim of being efficient is supported by the handsome payouts year after year as well as the largest number of unit holders. NIT supports the market by making long-term investment. With the passage of time, NIT has developed a portfolio comprising of quality companies. Investment in the companies enjoying growth potential as well as dividend payout track record ensures smooth income as well as capital gains for the unit holders.

NIT has become almost half a century old. During this long journey, the various milestones that have been achieved include: 1) being the first asset management company of Pakistan, 2) remaining the only open-end mutual fund for nearly three decades, 3) having the largest number of companies in its portfolio and 4) providing the best possible support to the market when investors become a little jittery.

NIT has investment in the largest number of listed companies among all the AMCs. It may also be kept in mind that since 2000 the size of listed capital as well as market capitalization at the Karachi stock exchange has increased manifold. The size of assets under NIT management is around one-third of the total assets of the mutual fund industry. Over the years, NIT has also introduced various types of funds to cater to the needs of various types of investors.

During worst of the times, the net asset value (NAV) of funds managed by NIT did not plunge, redemption pressure was of lesser intensity, and timely redemption further eased the panic selling. At no stage over the last ten years, NIT has delayed redemption beyond the stipulated time. While many of the AMCs were facing extreme redemption pressure post 2008 crisis and had to suspend redemption, NIT was still swarmed by the investors keen on making investment in its funds. Therefore, meeting the redemption request was 'business as usual'.

While reviewing the performance of any AMC, critics look at the following key indicators 1) size of assets under management, 2) payout history, 3) behavior of NAV when market is bearish, 4) time taken for redemption and 5) number of unit holders. It may not be wrong to say that NIT has proved to be 'all seasons' company and has been performing well even when equities market came under pressure.

One of the factors that give NIT an edge over its competitors is its 'outreach', ability to reach the retail investors. At no stage, it has felt complacent and kept on exploring new avenues. One such latest initiative was organizing kiosk at commercially important places in major cities. The idea has yielded results, as those who have the money are on a constant hunt for new investment options, which not only guarantee security of investment but also offer market driven as well as consistent returns.

Another key reason for the outstanding performance of NIT has been its investment perspective. It has been making long-term investment and abstaining from day trading. Some of the critics term NIT 'orthodox' maybe because it does not believe in 'adventurism'. This is because NIT basically caters to the needs of small investors who want security of their investment as well as look forward to receiving regular flow of income.

Being the biggest and also the best managed, investors as well as the government expect NIT to intervene during difficult times. NIT has been playing this crucial role without compromising the interest of its unit holders. One of the rules being followed religiously by NIT is abstention from speculative trading and the other picking up companies enjoying strong economic fundamentals and above all growth potential. It has been observed that a little carelessness by one or a few institutional investor can make price of quality scrips volatile. However, those acting imprudently must also face the consequences and should not expect any favor. NIT as the custodian of investments of thousands of unit holders considers optimizing their earnings as its prime responsibility.

Despite being the largest and the best performing, NIT management does not suffer from any complacency. There are efforts to further broaden and diversify the investment portfolio. The advantage of dealing with an institution of NIT magnitude ensures peace of mind, which has become the rarest commodities at this time. Not only the number of funds under NIT management has increased, these also cater to the needs of investors having different investment perspectives. The largest beneficiary of the robust mutual funds market has been the small investors. They enjoy all the benefits from security of the investment to the regular flow of dividend and from constant increase in NAV to enjoying the ease of entry and exit.