LAHORE: The mutual funds industry (MFI) grew 15 percent and stood at Rs416 billion in 2014 as compared to Rs362 billion in the previous year.
During the year, 22 funds were launched up to June 30, 2014 in 13 different categories. The highest numbers of funds were launched in Shariah Compliant fund category. Equity funds (both Conventional and Shariah Compliant) dominated the AUM of the industry with the largest share of 31.89 per cent.
As per the MUFAP Yearbook for the year 2014, Money Market funds (both Conventional and Shariah Compliant) held the second largest market share i.e. 29.45pc, followed by Income funds (both Conventional and Shariah Compliant) with market share of 24.06pc. The awareness campaigns for VPS has yielded encouraging results as evident from the increase in AUM from Rs4,822 million to Rs8,030 million and 33pc increase in number of investors. To provide detailed information about retirement saving and VPS, a dedicated website was also launched.
MUFAP’s professional committees were actively involved in dealing with industry issues pertaining to double taxation, WWF, FED and distribution of income. On the regulatory front, SECP allowed the outsourcing of non-core operations by AMCs. To maintain and further promote the transparency, the advertising code and requirements for placement of constitutive documents were introduced.
The outgoing year 2014 was not only an eventful year for the economic development but also for the financial industry and mutual funds in particular.
On the economic front, Pakistan was able to achieve 4.14pc GDP growth rate, highest in last six years. This economic growth was reflected in the financial sector particularly in the capital market. The equity market showed growth of 41pc while on the debt market, major reforms were undertaken by the government for credit rating agencies, Commercial Papers’ Regulations, introduced trading of government securities, development of commodity market and new products for Conventional and Shariah Compliant Markets. Chairman of the Mutual Funds Association of Pakistan Dr.
Amjad Waheed observed that domestic savings is a key determinant of economic growth of a developing country because higher saving rate leads to higher investment that enhances productive capacity of the economy. Pakistan’s savings rate at 13pc of GDP (economy) is significantly below that of other emerging economies. Mutual funds play multi-faceted role in an economy.
They mobilise savings and canalise it into broad range of avenues such as equities; sovereign and corporate bonds; and real estate etc.
They provide professional investment management and low cost diversification to small savers. These also help reduce systematic risks in the equities, debt and money markets. Tax credit available to unit holders of mutual funds and voluntary pension schemes help promote private savings.
According to Dr Amjad Waheed, Mutual Funds Assets in Pakistan’s are around $4 billion versus $162 billion in India. India’s economy is about eight times larger than Pakistan. Even after adjusting for this difference, Pakistani Mutual Funds Assets should have been around $20 billion. This would have helped improve savings rate leading higher level of development and economic uplift of the country.
He said that in Pakistan, retail segment constitutes only 24pc of total assets of the industry.
Internationally, about 80pc of mutual funds assets are owned by the retail sector, while remaining are owned by the corporate sector. Pakistan mutual fund industry has great potential to expand the retail investor base both in urban and rural areas. Presently there are around 200,000 investors in the country versus 30 million bank account holders.
