Mutual Funds Mutual Funds are a collection or a pool of funds generated by investments of individuals and corporates.

This pool is then invested in different avenues like stocks, money-markets, bonds, Sukuks , TDRs , securities and any avenue of investment. The pool of funds is managed by expert fund managers who take decisions on investing these funds in different avenues to achieve better rates of return. The return is then distributed amongst the pool members and fee of managing the pool is charged, which is usually nominal and is adjusted in net asset value of the fund, by the asset management company. There are two classifications of Mutual fund Open ended fund and Close ended fund. Open ended Vs Close Ended Mutual fund

Open ended fund are those in which you can invest and disinvest on your convenience and choice. There are no binding or tenure of investment set on your investment. A net asset value (NAV) is announced every day. Close ended funds are those funds in which you invest once they are offering there IPO or initial public offering .The fund is then listed and traded like a stock on a stock market. Why Mutual Funds

Question arises why we should invest in mutual fund rather than investing our funds ourselves in different avenues. The main reasons why you should invest in Mutual fund is that : 1. do. 2. Your investment is diversified in different avenues which reduces exposure to single investment better returns for you because of its , and it generate the risk of volatility and portfolio diversification. Your fund is managed by professionals who are good at what they

3. 4.

In Pakistan if you invest in mutual funds you can claim a tax Mutual Funds generate better returns then bank deposits, and other

rebate on your taxable income. investment portfolios.

General Misconceptions There is general misconception in the public at large that Mutual funds are

only relate to stock exchange , which is not true. As described earlier there are many avenues of investment in mutual fund and stock market is one of them . Following are the types of Mutual funds : 1. 2. 3. 4. 5. 6. 7. Money Market Funds Income Funds Balanced Funds Index Funds or Equity Funds Islamic Funds Bonds Fund Specialized Funds

There can be many classifications of the funds as per the investment mode.

Available Mutual Funds in Pakistan

Mutual Funds market is a growing market in Pakistan. Even though I believe it is not being promoted as it should be, but many people are showing their interest in investing in mutual funds. According to a research as of November 2010 mutual fund market in Pakistan stood at Rs.254 billion which is approximately $ 2.96 billion. Following are the asset management companies that are currently offering mutual funds in Pakistan : 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. clients. Al Meezan Investments UBL Funds Arif Habib Asset Management NIT MCB Asset Management Faysal Asset Management ABL Asset Management Company Limited Alfalah GHP Investment Management Limited Atlas Asset Management Limited BMA Asset Management Company Limited IGI Funds Limited JS Investments Limited KASB Funds Limited NBP Fullerton Asset Management Limited PICIC Asset Management Company Limited

Each of these companies have different types of mutual funds to offer to their

Current scenario of Mutual Funds in Pakistan

The mutual funds in Pakistan achieved 15 percent growth in the nine months of the ongoing financial year. As far as the performance in different categories is concerned, the size of open-ended funds which stood at five percent increased by four percent in 3QFY11 reaching Rs 203 billion while the size of the closed end funds came at Rs26 billion, showing a decline of four percent during 3Q-FY11. However, mutual funds witnessed slow growth during 3QFY11, as its assets increased by three percent and amounted to Rs229 billion. The mutual fund industry, however, has shown a decline of two percent in March 2011 in comparison with March 2010. Comparing growth of the zero percent local mutual funds industry in quarterly terms, the industry size remained stagnant in 1QFY11 (July-September 2010) and increased by only two percent, but showed good growth of 10 percent in the second quarter of FY11 (OctoberDecember 2010) mainly on the back of the upward movement of equity bourses, said Mazhar Sabir of the InvestCap Research. He stressed that in March 2011 the income funds category earned annualized return of 21 percent, better than the previous month's return of 18.7 percent backed by the upward revision in TFC pricing during the month. The income funds earned 12.6 percent average annualized return in 3QFY11 and on cumulative basis, during 9MFY11, the category posted average annualized return of 11.2 percent. The size of the income funds which stood at Rs38 billion in March 2011 continued its negative trend and declined by 11 percent month-on-month. During 3QFY11, the income funds, which showed a decline of 10 percent, were ignored by investors amid volatility in the TFC pricing methodology adopted by the industry. The money market funds category crossed the milestone of Rs 50 billion in December 2010 and distinguished itself as the highest funds managing category. During 3QFY11, the money market funds showed an appreciation of

25 percent to reach Rs 62 billion. However, in March 2011, the category is showing a decline of seven percent on a monthly basis. The money market funds category earned average annualized return of 12.1 percent, which is slightly lower than the last month's return of 12.7 percent. During 3QFY11, the money market funds category posted average annualized return of 12.2 percent. The benchmark KSE-100 index lost 1.8 percent in 3QFY11, while the equity funds' category posted an average return of 5 percent, outperforming the benchmark. Simultaneously, in March 2011, the category earned average return of 7.7 percent as against the KSE100 index return of 4.6 percent. During the month, most equity funds were observed to have outperformed the return in the benchmark KSE-100 index.