Mutual funds witness highest growth in three years

Money market fund becomes the largest category of the industry.

KARACHI:

The mutual funds industry rose by an impressive 51% to take its asset value to Rs379 billion in fiscal 2012, the highest gain in the past three business years.

The growth is almost twice compared to the growth of 25% witnessed last year, says a report released by InvestCap.

Major growth was witnessed in income fund, money market, Islamic income and Islamic money market funds, which surged by 124%, 95%, 43% and 22% respectively.

ABL Asset Management and NAFA Funds witnessed the highest growth of 233% and 102% in their asset under management. “The main reason for such growth was introduction of new funds under the umbrella of the company as well as appreciation in the size of income and money market funds of the respective fund managers,” adds the report.

Category-wise

During the financial year, the fixed income funds category of open-ended funds registered an appreciation of a massive 124% to reach at Rs87 billion and contributed 24% to the total open-ended size of the industry against a contribution of 17% in the preceding year.

Money market funds after witnessing tremendous growth of more than 100% during the last two years maintained its high pace upward trajectory with 95% growth in fund size. “With the induction of two new money market funds in the category, net assets of the category reached to Rs150 billion and made it the largest category in the industry,” says the report.

The reason behind this phenomenal growth in money market funds was the investor’s general preference for low-risk better return product, adds the report. “As the central bank kept the discount rate at existing level since October 2011, money market fund managers shifted their investment to six-month papers and received better returns from their investments in treasury bills.

The equity funds category posted an average return of 13.5%YoY, outperforming the KSE 100-share index by 320 percentage points over the year. The benchmark KSE 100-share index gained 10.4% to 13,801 points.

The main reason for the outperformance was superior return of AKD Opportunity Fund. The fund made returns of 32.3% and outperformed the category by 19% and the benchmark 100-share index by 22%, says the report.

Published in The Express Tribune, July 24^th, 2012.