Mutual funds stay stagnant

Income funds steal the limelight with solid performance.

KARACHI: During July 2012, the mutual funds industry showed sluggish movement and declined 1% month-on-month (MoM) to touch Rs375bn, as compared to Rs379bn, according to an InvestCap research note. Open-ended funds’ size gew 1%MoM to reach Rs351bn while closed-ended funds declined by 3% MoM to close at Rs23bn.

During the month, the income funds category grew 23% MoM, on the back of massive growth in the size of the ABL-Government Securities Fund, which grew 58 % MoM to reach Rs55bn. On the other hand, the money market funds category of open-ended funds declined 14% MoM, while the fund of funds category contracted 42% MoM. During the first seven months of this calendar year (7MCY12), the mutual funds industry has witnessed decent overall growth of 31%, after clocking in at Rs289 billion in December 2011.

After recording remarkable growth in fiscal 2012 – during which the income funds category grew 124% year-on-year – the said category achieved another milestone and crossed the Rs100 billion mark in the first month of fiscal 2013. The category holds Rs107 billion in total assets currently, showing growth of 23% MoM. The funds posted average annualised return of 9.5% in July, 1.8% lower than during the previous months’ return of 11.3%.

The money market funds category – which grew 95% during fiscal 2012 – recorded a decline of 22% MoM in July to close with Rs129 billion in total assets, as compared to Rs150 billion in June. During 7MCY12, however, the category has grown 23%. The money market funds category earned average annualised return of 11.7% in July, improved by 60 basis points against the previous month’s return of 11.1%.

In July, the equity funds category remained uninspired and declined by 2% MoM to reach Rs51 billion, despite a 5.6% appreciation witnessed in the KSE-100 index. During 7MCY12, the category appreciated by 16% calendar-year-to-date, as against KSE-100 index appreciation of 28% during the same period. The category earned returns of 5.6% in July, with the highest return earned by NAFA Stock Fund at 8.6%, as against the benchmark KSE-100 index return of 5.6%.

Published in The Express Tribune, August 17^th, 2012.