Islamic income funds record 158% growth

Assets under management cross Rs15 billion mark.

KARACHI: Islamic income funds have recorded an increase of 158 per cent in their asset size during the first seven months of the current fiscal 2010-11 and this segment of the mutual fund industry is now worth more than Rs15 billion, said a research analyst.

Talking to The Express Tribune, InvestCap analyst Mazhar Sabir said that Meezan Sovereign Fund has been the fastest growing fund in the category as the fund has increased its share from 10 per cent to over 60 per cent since September 2010.

A monthly review of the mutual fund industry released by InvestCap also highlighted that most of the investors have been opting for money market funds in recent weeks. Money market funds have grown by 95 per cent from July to January to hit Rs62 billion.

“Interest rates are expected to continue rising in the coming months and for this reason, investors are mainly opting for money market funds,” said Sabir. The analyst explained that these funds are viewed as viable short-term investments under prevailing market conditions because they typically offer an investment horizon for just three to six months with guaranteed returns.

During January, money market funds gave average annualised returns of 11.9 per cent, while the maximum return in this category was reported by Askari Sovereign Cash Fund at 12.5 per cent.

The mutual fund industry has recorded a growth of 19 per cent so far in fiscal year 2011 to reach Rs238 billion. The size of open-end funds, which contribute more than 87 per cent to the industry, appreciated by 24 per cent during the seven months to reach Rs209 billion.

After a decline of one per cent in December, the overall industry witnessed a healthy growth of six per cent in January. From July to January, the benchmark KSE-100 index surged 27 per cent and equity funds too recorded a growth in assets of 27 per cent, according to the report. Equity funds fell by 0.5 per cent in terms of assets in January.

Income funds have declined six per cent to Rs44 billion in the seven months. However in January, the size of the funds rose three per cent. Most of the income funds posted negative returns amid downward price movement in term finance certificates, with average earnings of just 1.1 per cent.

Published in The Express Tribune, February 26^th, 2011.