Mutual funds industry crosses Rs 300 billion mark

KARACHI: Pakistan’s mutual funds industry crossed Rs 300 billion mark or $ 3.40 billion once again, with an upward movement of 4.5 percent month-on-month in November 2011 to close at Rs 302 billion.

The industry peaked out in terms of size when it touched as high a level as Rs 395 billion back in April 2008 while subsequently bottomed out to Rs 174 billion in January 2009 due to massive redemptions amid economic crises in the country, analysts said.

The growth in industry’s asset size has been phenomenal since then, at 74 percent, which was mainly driven by fixed income and money market funds having 93 percent cumulative contribution.

Mutual funds grew during November 2011 despite continuous fall being witnessed in the local equities, as income fund side of the industry improved further. In November 11, income funds showed a handsome growth of 21 percent MoM to reach at Rs 55 billion, where asset size growth primarily came from solid appreciation of 151 percent MoM and 101 percent MoM in UBL’s income funds namely, UBL Government Securities Fund (UGSF) and United Saving Income Fund (USIF) respectively.

On the other hand, the size of the equity funds declined by 5.8 percent MoM where Islamic equity funds were down by 3.9 percent MoM in November 11 mainly on the back of fall witnessed in the local equity market.

Open-end funds also witnessed a growth of 5 percent MoM to reach at Rs 282 billion, while closed-end funds were lacklustre during the month though decreased by only 1.7 percent MoM to reach at Rs 20.5 billion.

In 5MFY12, the mutual funds industry remained on upward track showing a decent growth of 21 percent, while during 11MCY11, the industry appreciated by a massive 36 percent and that was mainly propped up by fixed income and money market funds.

The yields on income funds remained on the lower side as compared to the last month’s. As a result, income funds earned an average return of 10.1 percent in November 11 down by 615bps over last month. The main reason for lower return was the reduction in baseline yields of the money market and absence of capital gain, which was booked by the funds during October 11 after massive cut of 150bps in discount rate.

The size of the income funds category appreciated by 21 percent in November 11 to reach at Rs 55 billion owing mainly to huge appreciation in UBL’s income funds, as stated earlier.

The money market funds in 5MFY12 elevated by a massive 54 percent to reach at Rs119 billion however with an appreciation of only 4 percent in November 11.

A fund-wise analysis reveals major growth was witnessed in the fund size of Faysal Money Market Fund, which rose by a gigantic 263.7 percent MoM, followed by PICIC Cash Fund (PICIC-CF) which grew by a significant 49 percent MoM, during November 11.

The local equities remained in a jittery mode in past 11 months of the current year, showing a declining trend in continuation with the same pace equities were down 2.8 percent MoM.

Equity market decline has been affecting the size of the equity funds, which is mainly dependant on the market, as it pulled equity funds down by 5.8 percent MoM in November 11 to reach at Rs 46billion. During 11MCY11, the size of the equity funds category fell by 8.1 percent, which has been more than the decline observed in equities as the KSE100 index moved down by only 4.1 percent in the same period. Amongst individual funds, Pakistan Stock Market Fund (PSM) was down by 10.4 percent MoM, followed by CROSBY Dragon Fund (CDF) with 7.1 percent MoM decline in terms of asset size.

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