ISLAMIC MUTUAL FUND

INDUSTRY IN PAKISTAN

GROUP MEMBERS
Wajid Ali
Haifa Saleem
Nabita Ishtiaq
Shakeel Aslam
Hassan Naseer
Rana Tassaduq

3335
3336
3353
3338
3328
3316

PRESENTED TO:

Dr. Salman

Presented by:

Wajid Ali
MBA-E9-3335

INTRODUCTION
A mutual fund is an investment vehicle that pools in
the monies of several investors, and collectively
invests this amount in either the equity market or
the debt market, or both, depending upon the funds
objective.
This means you can access either the equity or the
debt market, or both, without investing directly in
equity or debt.

CONCEPT OF A MUTUAL FUND

A Mutual Fund is a trust that pools 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 as shares, debentures and
other securities.
The income earned through these investments and
the capital appreciations realized are shared by its
unit holders in proportion to the number of units
owned by them.

How Mutual Fund works?

INVESTORS
Pool their
money with

Passed
back to

FUND
MANAGERS

RETURNS

Generate

Invest in

SECURITIES

Mutual Funds
Mutual
Funds
Professional
Fund Managers
MBAs
CAs
CFAs
The Investor

Investments
Stocks
Money Markets
TFCs
Bank Deposits
CFS

Continue..
Income is earned from dividends on stocks and interest
on bonds.
If the fund sells securities that have increased in price,
the fund has a capital gain. Most funds also pass on
these gains to investors in a distribution.
If fund holdings increase in price but are not sold by
the fund manager, the fund's shares increase in price.
You can then sell your mutual fund shares for a profit.

Worldwide Mutual Fund Industry

story and Inception of Mutual Funds

First modern day mutual fund was opened in North America in 1924.

The GREAT DEPRESSION of 1930s in USA has stalled the growth of

mutual funds sector, like many other economic activities.

Yet it was, 1990s that mutual funds became mainstream investments in the
USA and around the globe.

At the end of June 2013, total mutual fund assets all over the world were
USD 30.05 trillion.

Presented by:

Haifa Saleem
MBA-E9-3336

Islamic Mutual Fund

Industry
The Islamic mutual funds market is one of the fastest growing
sectors within the Islamic Financial System.
Yet when compared to the mutual fund industry at large, Islamic
mutual funds are still in their infancy stage of growth and
development.
The wider acceptance of equity funds by Shariah Scholars in
early 1990s paved the way to launch Islamic mutual funds.
Currently there are over 600 Islamic Institutions in some 75
countries that are managing funds worth over USD 1.5 trillion
by the end of June 2013.

Comparison of Islamic VS World Wide

Mutual Fund Industry
4.99%

Trillion USD

$ 1.5
trillion
$ 30.05
trillion

World Wide Mutual Funds

World Wide Islamic Mutual
Funds

TYPES OF MUTUAL FUNDS ON THE BASES

OF STRUCTURE

Open

End:-

Continuously offer and redeem their units to the investors.

Closed

End:-

One time issuance of certificates and then are traded in the

secondary market.

Open Ended Funds

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.

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.

Closed End 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.

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

buyer.

have a

TYPES BY INVESTMENT
OBJECTIVE

GROWTH / EQUITY ORIENTED SCHEMES

EQUITY FUNDS
INDEX FUNDS
SECTOR FUNDS

INCOME / DEBT ORIENTED SCHEME

SPECIALIZED FUNDS

ISLAMIC FUNDS
BALANCED FUND
LIQUID FUNDS
BOND FUNDS

Presented by:

Nabita Ishtiaq
MBA-E9-3353

Benefits OF Mutual Funds

Professional

Management:-

Expertise to manage and reinvest interest or dividend income, or

to investigate 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, so

investors have easy access to their money. Many individual
securities can also be bought and sold readily, others aren't
widely traded.

Continue..
Diversification:Securities from hundreds or even thousands of issuers it reduces
the risk of loss.

Convenience:Mutual funds offer services that make investing easier. Mail,

telephone, or the Internet. Automatic investments into a fund or
automatic transfers from a fund to your bank account.

Tax Free Return:The stock dividend from mutual funds are exempt from tax.
Cash dividend taxable.

TAX BENEFITS OF MUTUAL FUNDS

Comparison of Income Funds with Bank
Deposits

Bank Deposits

Mutual Funds*

Pre tax return

12.0%

12%

Tax Deduction

4.2%

0%

After tax return

7.8%

12%

Pre tax return

12.0%

12%

Tax Deduction

1.2%

0%

After tax return

10.8%

12%

Corporate (35% Tax Bracket)

Individuals (10% Tax Bracket)

RISK FACTORS OF MUTUAL

FUNDS

MARKET RISK: Sometimes prices and yields of all securities rise and
fall. Broad outside 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 not impossible to predict.

POLITICAL/GOVERNMENT

POLICY

RISK:

LIQUIDITY RISK: Liquidity risk arises when it becomes difficult to sell

Changes in
government policy and political decision can change the investment
environment.

the securities that one has purchased. 1

History of mutual funds in Pakistan

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, the Securities and
Exchange Commission of Pakistan (SECP) which licenses each
Asset Management Company in strict compliance with the
NBFC Rules, 2003 and requires all AMCs to obtain an
independent rating.
Mutual funds introduce in Pakistan in 1962, with the public
offering of National Investment Trust followed by the
establishment of the Investment Corporation of Pakistan (ICP)
in 1966.

Rules Govern Mutual Funds in Pakistan

There are two rules govern mutual funds in Pakistan, which are:

Investment Companies and Investment Advisors' Rules, 1971.

(Govern closed-end mutual funds)

2. Asset Management Companies Rules, 1995. (Govern openended mutual funds)

Comparison of Pakistans VS
World Wide Islamic Mutual Funds
2.66
%

Trillion USD

$ 0.04
trillion
$ 1.50
trillion

Pakistan's Islamic Mutual

Funds
World Wide Islamic Mutual
Funds

Presented by:

Shakeel Aslam
MBA-E9-3338

Continue..
As the year 2013 draws to a close, the mutual fund industry
appears to be undergoing a consolidation phase. The number of
asset management companies has gone down from 27 in 2012 to
24 by now.
In the year-ended June 30, there were about 175,000 individual
investor accounts (not to be confused with number of individual
investors), against about 171,000 in the prior year.
This seems to be the logical next step in the evolution of this
industry, which is still in a developing stage, with less than Rs.
400 billion in total assets under management.

Why Mutual Funds lagging in

Pakistan?
Controlled by Public Sector, initially
Lack of awareness
Interest rates were too high
Education
Distribution
Low savings

Mutual fund and Pakistan

MUFAP (mutual fund association of Pakistan) is the trade body for Pakistan's
multi billion rupees asset management industry.
MUFAP role is to ensure transparency, high ethical conduct and growth of
the mutual fund industry.
After the establishment of MUFAP in 1996, private and foreign firms were
allowed to float open-ended funds for the general public.
. Mutual Funds were initially overseen by the Corporate Law Authority
(CLA) under its Securities Wing.
The money that members manage is in a wide variety of investment vehicles
including stocks, bonds, money market instruments, government securities
and bank deposits.

Continue..
The CLA, then a division of the Ministry of Finance, was gradually transformed
and made independent as the Securities and Exchange Commission of Pakistan
(SECP) as part of the Capital Market Development Program (CMDP) initiative
of the Asian Development Bank undertaken for Pakistan.
MUFAPs role is to establish the essential codes and standards within the industry
to ensure the trust and confidence of investors and build the industry as a whole.

The CMDP envisaged formation of four types of Self-Regulated

Organizations (SROs) to function under the SECP
Stock Exchanges recognized as separate SROs;
Mutual Funds Association of Pakistan (MUFAP);
Leasing Association of Pakistan (LAP); and
Modaraba Association of Pakistan (MAP).

Mutual Fund (Asset Management)

Companies in Pakistan
NATIONAL INVESTMENT TRUST.
NBP FULLERTON ASSET MANAGEMENT LTD.
ABAMCO LTD.
AKD INVESTMENT MANAGEMENT LTD.
AL FALAH GHP INVESTMENT MANAGEMENT.
AL-MEEZAN INVESTMENT MANAGEMENT LTD.
AMZ ASSET MANAGEMENT LTD.
FAYSAL ASSET MANAGEMENT LTD.
FIRST CAPITAL INVESTMENTS LTD.

Continue..
ARIF HABIB INVESTMENT MANAGEMENT LTD.
ASIAN CAPITAL MANAGEMENT (PVT.) LTD
ASKARI ASSET MANAGEMENT LTD.
ATLAS ASSET MANAGEMENT LTD.
BMA ASSET MANAGEMENT LTD.
HABIB ASSETS MANAGEMENT LTD.
HBL ASSET MANAGEMENT LTD.
KASB FUND LTD.
NATIONAL ASSET MANAGEMENT COMPANY LTD.
NATIONAL FULLERTON ASSET MANAGEMENT LTD - NAFA

Continue..
NATIONAL IINVESTMENT TRUST LTD.
NBP CAPITAL LTD.
NOMAN ABID INVESTMENT MANAGEMENT LTD
PICIC ASSET MANAGEMENT COMPANY LTD.
PRUDENTIAL FUND MANAGEMENT LTD
SAFEWAY MANAGEMENT LTD.
UBL FUND MANAGERS LTD.
WE INVESTMENT MANAGEMENT LTD.
CROSBY ASSET MANAGEMENT LTD.
DAWOOD CAPITAL MANAGEMENT LTD.

Presented by:

Hassan Naseer
MBA-E9-3328

Mutual fund
Examples in
Pakistan

NATIONAL INVESTMENT TRUST

LIMITED

The National Investment Trust Limited (NITL) is the first Asset

Management Company of Pakistan, formed in 1962, had Funds
under management of Rs.87 billion, with approximately 53,936
unit holders as on December 31, 2013.

NIT's distribution network comprises of 23 branches, various

Authorized bank branches all over Pakistan.

The Trust constituted under the Trust Deed dated 12th

November 1962, executed between National Investment Trust
Ltd (NITL) as Management Company and National Bank of
Pakistan as Trustee.

WHYSHOULDYOUINVESTWITH
NIT?
Sharing in diversified portfolio.
Continuous attractive return.
Expertise of experienced and professional managers.
Tax benefits on investment.
Easily en-cashable.
Operations under strict adherence to Government regulations.
Investment in NI(U)T units starts with a small amount of Rs. 5,000.
Qualify as collateral for availing bank financing.

Continue..
It minimizes the risk of investment as compared to individual investment
in Stock Market.
Investment decisions at NIT are based on company specific and sector
related detailed analysis of information which may not be readily
accessible to an individual.
By investing in NIT units, the unit holder is indirectly investing in
the shares quoted on stock exchanges and reaps the benefits of
professional decision making.
It helps to make ownership of the industrial projects more broad based.

Meezan Islamic Fund

Meezan Islamic Fund (MIF) is not only the largest Shariah
compliant equity fund but also the largest Equity Fund in
private sector in Pakistan.
MIF invests in combination of income and growth stocks of
Shariah compliant companies with demonstrated track record of
profitability and stable dividend payout history.
Incorporated on 27th February 1995, it is a group company of
Meezan Bank Limited and Pakistan Kuwait Investment
Company Private Limited and is currently managing assets of
over Rs. 61 Billion.

Salient Features Of MIF

Professional Management:Our fund managers are trained investment professionals. Their knowledge provides
you and opportunity to earn greater risk adjusted returns. Also by investing in MIF,
you pass on the job of continuous monitoring and evaluation of investment
opportunities to the Fund manager.

Healthy Return:Apart from tax benefit, MIF also provides you a healthy return on your investment.

Tax Credit:Investment in MIF enables you to get tax benefit up to Rs. 232,500/- in case of
salaried person or up to Rs 272,250/- in case of non salaried person on investments up
to Rs. 1,000,000/- under applicable tax laws, if investment is held for a period of two
years.

Affordability:A minimum investment of Rs. 5,000 makes MIF an affordable investment for small
investors. Subsequent investments can be made with a minimum amount of Rs. 1,000.
There is no cap on maximum amount of investment.

Impact of global funds sector on

the Pakistani industry
Not much impact of global funds sector on the Pakistani industry
because international funds who come to Pakistan dont exactly
invest in mutual funds.
Rather they invest in stocks directly, therefore We dont see any
direct link between the two, however Pakistani mutual fund
industry can not remain isolated from developments taking place
internationally and is adapting the international trends and best
practices.

Presented by:

Rana Tassaduq
MBA-E9-3316

Current issues of funds management

Inadequate regulatory framework to cater for new products

and growing needs of investors.
Limited investment options.
Lack of awareness among the general public

Future of Islamic mutual fund

sector in Pakistan
The future outlook of the Islamic mutual funds industry in Pakistan
is very promising and encouraging. The industry holds several
exciting opportunities for both corporate and individual investors
including the retired persons.
Islamic mutual fund industry in Pakistan is generating keen interest
among a growing number of investors. It is attracting fund
managers and leading players of industrial and corporate sector as
sponsors
It has been providing versatile and attractive investment avenues to
the general public while paying comparatively better returns based
on dividend yields and capital gains.

Role of Government to promote

Mutual Fund Sector
Mutual Funds Association of Pakistan is playing a pioneering
role in the promotion of mutual fund sector in Pakistan by
acting as a facilitator between the market participants and the
regulators.
It disseminates essential information on various funds, the fund
managers, the stock market as well as the regulatory
environment under which open and closed-end.

Challenges for Mutual Fund

Industry
For Islamic mutual funds
to progress in Pakistan, a variety

of
challenges need to be overcome. The significant challenges are
mentioned as following:
Lack of diversified products range
Understanding of investors need
Public awareness at mass level
Un-stability of Stock Market
Dearth of liquid debt instruments
Protecting and maintaining the integrity and quality
Ensuring performance
Maintaining momentum to ensure viability
Providing competitive returns

Continue..

Mitigating the Risk involved

Inadequate Intellectual Capital
Comforting & convincing with bad past investment experiences
Budgetary constraints for Marketing activities.
Low saving and Investment oriented society
Information disclosure and transparency
Choosing appropriate distribution network
Right timing to launch funds
In time after sale activities
Strict monitoring of regulators

Recommendations

Team work for the growth of mutual fund industry.

Mass awareness and education about mutual funds.
Strengthening distribution network.
Understanding the fact that related financial industries are not
a threat.
Promoting healthy business practices and ethical code of
conduct.
Disseminating timely information.
Establishing affiliations with mutual funds associations in other
countries and promote one-to-one contacts.
Media should play a more supportive and constructive role for
awareness and disseminating information.

If you do not like any Rule , just Follow it , Reach the top and
Change the rule ........

Thank YOU
. !!!