Mutual fund sector grows 18%

KARACHI:

The local mutual funds industry declined by 0.8 per cent in February to close at a value of Rs234 billion after an appreciation of 6.1 per cent in January.

The decline in the industry could be attributed to the weak performance of equity funds, which posted a decline of 7 per cent in February, according to research by InvestCap.

After the political turmoil in Middle East and North Africa region intensified, foreign investors withdrew their funds, which prompted local equity investors to switch their investments from high-risk to low-risk avenues, said InvestCap analyst Mazhar Sabir.

However, the decline was well-supported by fixed income funds, which on an average basis, were up by 5.5 per cent in the month. As a result, the overall industry size fell by a negligible one per cent.

The size of open-ended funds stood did not experience much change, standing at Rs208 billion, while closed-ended funds were recorded at Rs27 billion, a decline of 6.2 per cent during the month.

Money market category rose by seven per cent in February while Islamic income and Islamic money market funds witnessed an appreciation of 7.6 per cent and 4 per cent, respectively.

However, during the first eight months of the fiscal year, the mutual funds industry showed healthy growth of 18 per cent since June 2010, when the size stood at Rs199 billion.

Preference for money market funds

Money market funds, once again, outperformed the industry and increased by seven per cent to reach Rs67.9 billion in February, compared with Rs62.4 billion in January.

Income fund returns remain volatile

Prices of term finance certificates (TFCs) remained volatile; after a hit faced by the income funds in January, with average annualised return of only 1.6 per cent, the category bounced back with an average 18.7 per cent per annum in February amid upward price revision of TFCs.

Published in The Express Tribune, March 19^th, 2011.