The re-composition led to over-exposure of pension fund investments in some of the merged sectors. Therefore, the revision in investment policy has been introduced to help pension funds diversify their portfolio by managing the risk, the SECP said on Friday.
In order to promote savings, the SECP said it had allowed the launch of both conventional as well as Shariah-compliant pension funds. A pension fund normally comprises three sub-funds — equity, debt and money market fund.
Over the past few years, Shariah-compliant pension funds have gained popularity. However, there is a shortage of short-term Shariah-compliant instruments. In order to meet the need for Shariah-compliant money market sub-funds, overall weighted average time to maturity for such sub-funds as well as time maturity for each Shariah-compliant government securities in portfolios of these funds have been substantially enhanced to enable them to improve both the credit quality and yield of their investments.
The SECP said that these measures would further encourage savings and enable pension funds to contribute to the growth of capital markets.
Published in The Express Tribune, January 22nd, 2011.
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