Appraisal of Mutual

Funds in Pakistan

By
Ali Noor
 Appraisal of Mutual Funds in Pakistan:

•History of mutual funds

•Types of Mutual funds in Pakistan
•Current Scenario
•Comparison With Asia/Pacific Industry
•Major Mutual Fund Companies
•Problems
•Performance of 4 different mutual funds
•Research Methodology
•Results
 History of Mutual Funds in Pakistan
1962 - Government of Pakistan established NITL which launched
first Open End Equity Fund in Pakistan – NIT

1966 - Government of Pakistan established ICP which launched

series of Closed End Funds

Only in the Mid 90s, the boom of mutual funds is witnessed

1994-95 - More funds launched in private sector

2006 - Total number of AMCs was 30 managing 56 mutual funds

 Types of Mutual Funds in Pakistan

• Money market funds

•Income funds
•Income and growth funds
•Growth and income funds
•Balanced funds
•Growth funds
•Index funds
•Sector funds
•Specialized funds
•Islamic funds
 Types of Mutual Funds in Pakistan
MONEY MARKET FUNDS
•Safest
•Invests assets only in the most
liquid of money instruments.
•Better yields than offered by banks,
1% to 3% higher
GROWTH AND INCOME FUNDS
•Objectives of growth and income
funds are to seek long-term growth
of principal and reasonable current
income.
•Investing in a portfolio of stocks
believed to offer growth potential &
dividend income
INCOME FUNDS
•The objective is to seek a high level
of current income equal with each
portfolio's risk potential.
•The risk / reward potential is low to
high
BALANCED FUNDS
Balanced funds are to generate
income as well as long-term growth
of principal.
These funds generally have
portfolios consisting of bonds,
preferred stocks, and common
stocks.
INCOME AND GROWTH FUNDS
•Primary purposes of income and
growth funds are to provide a steady
source of income and moderate
growth.
•Ideal for retirees needing a
supplement source of income.
INDEX FUNDS
Basically tracks the performance of
the stock market with
no need for a portfolio manager.
If the overall market advances, a
good index fund follows the rise.
Portfolios consist of securities listed
on the popular stock market indices.
 Mutual Funds Industry Year to Year Comparison
(BILLION RUPEES)

Source : SBP
Mutual Funds Industry Year to Year Comparison

Source : SBP
 Mutual Funds Industry Till 1st qtr 2009

Total Industry Size - Rs. 273 billion

Open end Rs. 238.6 bn
Closed end Rs. 34.4 bn

Total number of Funds - 95

Open end 82
Closed end 13

Source : SBP
Asia/Pacific Mutual Fund Industry 2009

Source : EFAMA
Asia/Pacific Mutual Fund Industry 2009

Source : EFAMA
Asset Management Companies in Pakistan
 Major Market Players

National Investment Trust Ltd.

Arif Habib Investment Management Ltd.

Al Meezan Investment management Ltd.

Atlas Asset Management Ltd.

UBL Fund Managers Ltd.

Why Mutual Funds lagging in Pakistan?

Controlled by Public Sector, initially

Lack of awareness

Interest rates were too high

Education

Distribution

Low savings
 AKD INVESTMENTS
Fund Name : Golden Arrow Selected Stocks Fund

Assets under Management : PkR 951.15 mn

Type of Fund  :    Closed-end

Date of Fund launch   : May, 1983

Date of Management takeover : Sep, 2004

Fund Index  : KSE100 Index

Security Name %
PPL 10.42
OGDC 8.44
DAWH 8.05
BAFL 6.34
NBP 5.20
GOLDEN ARROW SELECTED STOCK
FUNDS
 ARIF HABIB INVESTMENTS
Fund Name : Pakistan Stock Market Fund

Total Net Assets : Rs 1,682.55 Million

Type of Fund  :    Open-end

Date of Fund launch    11th March 2002  

Fund Index  : KSE100 Index

Pakistan Petroleum Ltd. 8.9%

Pakistan Oilfields Ltd. 7.7%
Packages Ltd. 7.6%
Fauji Fertilizer Company Ltd. 4.7%
ICI Pakistan Ltd. 4.5%
Allied Bank Ltd. 4.2%
Pak Suzuki Motors Ltd 3.9%
Engro Corporation Ltd. 3.7%
Nishat Mills Ltd. 3.7%
Searle Pakistan Ltd. 3.3%
PAKISTAN STOCK MARKET FUND
 AL-MEEZAN INVESTMENTS
Fund Name : Meezan Islamic Fund

Total Net Assets: PkR Rs 3963 millions

Type of Fund  :    open-end

Date of Fund launch    8th Aug 2003 

Fund Index  : KMI 30

TOP TEN HOLDINGS :

MEEZAN ISLAMIC FUND
 KASB INVESTMENTS
Fund Name : Karachi Stock Market Fund

Total Net Assets: PKR  213 million

Type of Fund  :    open-end

Date of Fund launch    March 2007 

Fund Index  : KSE 30

KARACHI STOCK MARKET FUND
FUNDS COMPARATIVE RETURNS
 Research Methodology
3 years quarterly data have been taken from financial reports of the 4 selected funds

Through regression, Impact on Return from key independent variables which include:

•Market Return(KSE 100, KSE 30, KMI 30)

•Total fund size (Rs million)
•Market capitalization (Rs Million)
• Net asset value
•EPU
•Fund age (months)

Through Hypothesis Testing Significance have been seen of the above mentioned
variables on the Return.
 Results
Golden Arrow Selected Stock Funds

Return = 20.253+0.722mktreturn+0.119fndsize+0.863mktcap+0.724nav+0.283epu-
0.230age

Through hypothesis testing all the variables were having a

significant impact in effecting the fund return

except

fund age and EPU.

The most significant variable is Market return

 Results
Pakistan Stock Market Fund

Return = 78.523+0.047mktreturn-0.1769fndsize+0.004mktcap+1.187nav-0.040epu+0.058age

Through hypothesis testing all the variables were having a

significant impact in effecting the fund return

except

Market Capitalization and EPU.

The most significant variable is NAV

 Results
Meezan Islamic Fund
Return = 5.33+0.7mktreturn+0.07fndsize+0.064mktcap+0.154nav+0.415epu+0.051age

Through hypothesis testing all the variables were having a

significant impact in effecting the fund return

except

Market Capitalization and Total Fund Size.

The most significant variable is Market Return

 Results
Karachi Stock Market Fund

Return = 23.5+0.86mktreturn+0.039fndsize+0..052mktcap+0.213nav+0.023epu+0.151age

Through hypothesis testing all the variables were having a

significant impact in effecting the fund return

except

Market Capitalization and EPU.

The most significant variable is again Market Return