Mutual Funds in Pakistan
“Mutual fund is a pool of money investedaccording to a common investment objectiveby an asset management company (AMC) onbehalf of the fund’s investors”. A mutual fundcan generate
from three differentsources, which are: Dividend, Capital Gainsand Appreciation of Share Price. The figureshows a mutual fund is deals with the followingentities; trustee, auditor, SECP, AMC andinvestor. A mutual fund provides liquidity,portfolio management expertise, riskdiversification, and stability to stock market
and it also mobilises savings by attractingfunds from small investors.
Mutual funds in Pakistan are registered and legally established in the form of a Trust, under the Trust Act of 1882. The mutual fund industry is regulated by, theSecurities and Exchange Commission of Pakistan (SECP) which licenses each AssetManagement Company in strict compliance with the NBFC Rules, 2003 and requiresall AMC’s to obtain an independent rating
.Mutual Funds were introduced in Pakistan in 1962, with the public offering of National Investment (Unit) Trust (NIT), followed by the establishment of theInvestment Corporation of Pakistan (ICP) in 1966.
Rate of Return
“A return is a measurement of how much an investment has increased or decreasedin value over any given time period”. The return of a mutual fund is calculated byusing the following formula;
(Final NAV + Distributions - Original NAV) / (Original NAV) X 100
Returns basically show how your investment has increased or decreased in value.Compounding earns returns on your returns and Transaction costs reduce returns.
Rules Govern Mutual Funds in Pakistan
1 http://www.pakistaneconomist.com/database2/cover/c96-72.asp2 www.igifunds.com.pk/knowledgeCenter.asp