mutual funds in pakistan
TRANSCRIPT
FOLLOWING ARE THE CONTENTS OF MY
PRESENTATION
Introduction & Concept of Mutual funds.
Working of Mutual funds.
History & Phases of Mutual funds.
Structure & Flow of Mutual funds.
Types of Mutual Funds.
Mutual Fund Performance.
Mutual Funds
• A Mutual Fund is a trust that pools together
the savings of a number of investors who
share a common financial goal.
• The money thus collected is then invested
in capital market instruments such asshares, debentures and other securities.
Mutual Funds
Mutual Funds
Professional Fund Managers
•MBA’s
•CA’s
•CFA’s
The Investor
Investments
•Stocks
• Money Markets
•TFC’s
•Bank Deposits
•CFS
In 1893, the first closed-end fund “The Boston Personal
Property Trust” was formed.
In Pakistan National Investment Trust (NIT) offered first
open end fund in 1962.
ICP offered a series of closed end funds in 1966, these were
later privatized in 2000.
History of Mutual Funds
History of Mutual Funds
The first mutual fund was established in Europe.
First mutual fund outside the Netherlands was the Foreign &
Colonial Government Trust, which was established in London in
1868.
Mutual funds were introduced into the United States in the 1890s.
They became popular during the 1920s.
Pool their money with
INVESTORS
FUND
MANAGERS
Passed back to
Generate
SECURITIES
Invest in
RETURNS
How Mutual Fund works?
Investors
Fund
Securities
Return
Given back to
That generates Which is invested in
Pool their money in
Mutual Funds Operations
STRUCTURE BACKGROUND
Open end and closed end funds are established through a trust deed as atrust under the trust act 1888.
Investment Company is established as a limited liability company.
Operated by two parties i.e. fund manager and the trustee or custodian.
Central Depository Company (CDC) largest trustee of mutual funds inPakistan with almost 90% of the market share.
Securities and Exchange Commission of Pakistan (SECP) through Non-bank financial companies (NBFCs) Regulations 2008 regulates the mutualfund industry.
Open End:-
Continuously offer and redeem their units to the investors.
Closed End:-
One time issuance of certificates and then are traded in thesecondary market.
Investment Company:-
One time issuance of shares and then are traded in thesecondary market.
TYPES OF MUTUAL FUNDS ON THE BASES OF STRUCTURE
A type of mutual fund, where there are no restrictions on the amount of shares the fund will issue.
If demand is high enough, the fund will continue to issue shares no matter how many investors there are.
Open-end funds also buy back shares when investors wish to sell.
It's important to understand that each mutual fund has different risks and rewards.
Open ended Funds
In general, the higher the potential return, the higher the risk of loss.
Although some funds are less risky than others, all funds have some level of risk - it's never possible to diversify away all the risk. This is a fact for all investments.
Open ended Funds
Closed End Funds have a predetermined and fixed number of shares outstanding.
Closed-end funds behave more like stocks because they trade on an exchange and the price is determined by market demand after an initial public offering (IPO) process.
Closed-end funds can be traded below their net asset value or above.
Close ended Funds
The closed-end fund "company" still has its own stock, which is
traded on an exchange and trades above or below its underlying
value, or net asset value (NAV), in this case.
They also trade according to market demands. Every seller must
have a buyer.
Close ended Funds
Primary Markets are the markets in which
corporations raise new capital. When securities are
sold for the first time directly from the issuer it is a
transaction in the primary market.
Primary Markets
Total Industry Size - Rs. 171 billion
(US$ 2.83 billion)
Total number of Funds - 56
Total number of AMC - 30
Open end Rs. 129.73 bn
Closed end Rs. 41.33 bn
Open end 34
Closed end 22
Public Sector 1
Private Sector 29
Mutual Funds Industry in 2006
Benefits OF Mutual Funds
Professional Management:-
Expertise to manage and reinvest interest or dividend income, or toinvestigate thousands of securities. Access to extensive research,market information, and skilled securities traders.
Liquidity:-
Mutual fund can be bought and sold on any business day, soinvestors have easy access to their money. Many individualsecurities can also be bought and sold readily, others aren't widelytraded.
Benefits OF Mutual Funds
Diversification:-
Securities from hundreds or even thousands of issuers it reducesthe risk of loss.
Convenience:-
Mutual funds offer services that make investing easier. Mail,telephone, or the Internet. Automatic investments into a fund orautomatic transfers from a fund to your bank account.
Tax Free Return:-
The stock dividend from mutual funds are exempt from tax. Cashdividend taxable.
Comparison of Income Funds with Bank Deposits
0%1.2%Tax Deduction
0%4.2%Tax Deduction
Bank Deposits Mutual Funds*
Corporate (35% Tax Bracket)
Pre tax return 12.0% 12%
After tax return 7.8% 12%
Individuals (10% Tax Bracket)
Pre tax return 12.0% 12%
After tax return 10.8% 12%
TAX BENEFITS OF MUTUAL FUNDS
MARKET RISK: Sometimes prices and yields of all securities rise and fall. Broadoutside influences affecting the market in general lead to this.
Inflation Risk: Inflation is the loss of purchasing power over time.
INTEREST RATE RISK: In a free market economy interest rates are difficult if notimpossible to predict.
POLITICAL/GOVERNMENT POLICY RISK: Changes in government policy andpolitical decision can change the investment environment.
LIQUIDITY RISK: Liquidity risk arises when it becomes difficult to sell thesecurities that one has purchased.
RISK FACTORS OF MUTUAL FUNDS
25 28 30 35 40 50 60
Start
Career
Marriage
Buy
Automobile
Buy
House
Children’s
Education
Daughter’s
Marriage
Retirement
AGE
Why Invest?
DIRECTLY THROUGH MUTUAL FUNDS
Stocks
Bonds/Debentures
Corporate FD’s
Short Term Deposits
Govt.. Paper.
Equity
Funds
Debt Funds
Money Market Funds
Where do Mutual Funds come in?
Controlled by Public Sector, initially.
Lack of awareness.
Interest rates were too high.
Education.
Distribution.
Low savings.
Why Mutual Funds lagging in Pakistan?
The National Investment (Unit) Trust is Pakistan’s largest and oldestMutual Fund. As on June 30, 2009, NIUT had funds under managementof around Rs. 28 billion invested in over 430 listed companies and hadapproximately 56,000 unit holders
Mutual Funds were introduced in Pakistan in 1962, with the publicoffering of National Investment (Unit) Trust (NIT) which is an open-end mutual fund in the public sector. This was followed by theestablishment of the Investment Corporation of Pakistan (ICP) in 1966,which subsequently offered a series of closed-end mutual funds
Currently there exists one open end (NIT) mutual fund in public sector.Twelve open-ended and fourteen closed-ended mutual funds underprivate sector management, and there are many more Funds in thepipeline
Mutual Funds Industry in Pakistan
by: G
urm
eet Sin
gh
NATIONAL INVESTMENT TRUST
NBP FULLERTON ASSET MANAGEMENT LIMITED
ABAMCO LIMITED
AKD INVESTMENT MANAGEMENT LTD.
AL FALAH GHP INVESTMENT MANAGEMENT
AL-MEEZAN INVESTMENT MANAGEMENT LIMITED
.
Mutual Funds Corporation in Pakistan
AMZ ASSET MANAGEMENT LTD.
ARIF HABIB INVESTMENT MANAGEMENT LTD.
ASIAN CAPITAL MANAGEMENT (PVT.) LTD
ASKARI ASSET MANAGEMENT LTD.
ATLAS ASSET MANAGEMENT LTD.
BMA ASSET MANAGEMENT LTD.
by: G
urm
eet Sin
ghMutual Funds Corporation in Pakistan
by: Gurmeet Singh
Meezan Islamic Fund (MIF) is not only the largest Shariah compliant equityfund but also the largest Equity Fund in private sector in Pakistan.
MIF invests in combination of income and growth stocks of Shariah compliantcompanies with demonstrated track record of profitability and stable dividendpayout history.
Meezan Islamic Fund
Risk Diversification:-
MIF reduce the risk of volatility of prices by investing your money in a welldefined portfolio of securities.
Cost Efficiencies:-
The per unit research and execution costs of a fund manager are also lowerdue to the large size of portfolio under management.
Salient Features Of MIF
Professional Management:-
Our fund managers are trained investment professionals. Their knowledgeprovides you and opportunity to earn greater risk adjusted returns. Also byinvesting in MIF, you pass on the job of continuous monitoring andevaluation of investment opportunities to the Fund manager.
Healthy Return:-
Apart from tax benefit, MIF also provides you a healthy return on yourinvestment.
Salient Features Of MIF
Tax Credit:-
Investment in MIF enables you to get tax benefit up to Rs. 232,500/- in case ofsalaried person or up to Rs 272,250/- in case of non salaried person oninvestments up to Rs. 1,000,000/- under applicable tax laws, if investment isheld for a period of two years.
Affordability:-
A minimum investment of Rs. 5,000 makes MIF an affordable investment forsmall investors. Subsequent investments can be made with a minimum amountof Rs. 1,000. There is no cap on maximum amount of investment
Salient Features Of MIF
Fund Statistics:
Fund Type Equity
Launch Date 8-Aug-03
Trustee Central Depository Company
Benchmark KMI-30 Index
Auditors KPMG Taseer Hadi & Co.
Management Fee 2 %
Front End Load 2%
Listing KSE
AMC Rating AM2
Status of Funds
Description30 June
2005
30 June
2006
30 June
2007
30 June
2008
30 June
2009
30 June
2010
30 June
2011
Dividend Per Unit Rs.
7.50 17.50 17.50 15.60 10.00 - 9.00 10.00
% of Face Value(i.e., Rs. 50/ Unit)
15.00%
35.00%
35.00%
31.20%
20.00%
-18.00%
20.00%
% of Opening NAV
15.00%
32.15%
29.81%
26.61%
16.70%
-25.51%
26.90%
Dividend History