Industry assets under pension funds have risen at annual rate of 45%.
Habib Asset Management (HAM) is going to launch a pension fund with equity, income and money market sub-funds in 2013, HAM CEO Imran Azim told The Express Tribune in an interview.
He added his asset management company (AMC), which is a subsidiary of Bank AL Habib, is also going to launch an Islamic equity fund this year.
Established in 2006, HAM is currently managing only four funds in the categories of fixed income, equity, money market and Islamic hybrid.
Assets in pension and Islamic pension constituted only 0.7% of total net assets of Pakistan’s mutual funds industry, which were Rs380.5 billion at the end of fiscal year 2012. However, they have increased far more rapidly than the assets under equity or fixed income funds: combined assets of pension and Islamic pension funds have risen at an annualised rate of 45.5% since 2007, the year these funds were first launched in the country.
On the contrary, assets in equity funds actually declined by 14.3% over the same period. Similarly, assets under fixed income recorded a marginal annualised increase of 0.5% between 2007 and 2012. However, assets under money market funds have grown 502.8% annually since their launch in 2008.
“Increasing the number of funds has never been our objective. Our aim is to increase our assets under management,” he said.
After increasing at an annualised rate of over 33% for the last three years, HAM’s assets under management were Rs4.3 billion on February 27, which is 1.3% of total assets under management of Pakistan’s mutual funds industry of Rs313.8 billion.
“With only four funds so far, we have offered nearly all sorts of investment avenues. There’s no point in naming funds differently when their characteristics are essentially the same,” he said, referring to the industry-wide practice of launching various funds with similar asset allocation strategies.
Over Rs2.8 billion, or almost two-thirds of HAM’s assets under management, is managed under the cash fund alone, company’s latest data shows.
Despite the stock market boom, he said, cash funds are still attracting heavy investments. “One reason is that retail investors still find equities to be a risky game. Our investors lack temperament. They tend to go for short-term gains as soon as the market goes up,” he said.
While the returns of HAM’s income and Islamic balanced funds in January were higher than their respective benchmarks, its stock and cash funds underperformed. For instance, its stock fund’s year-to-date performance (July 2012-January 2013) remained at 15% as opposed to the industry-wide benchmark of 24.9%.
“It’s true that the performance of two of our four funds was not impressive. I admit there’re some issues with our asset allocation strategy,” he said, quickly adding only five out of 19 stock funds of Pakistani AMCs surpassed the year-to-date benchmark as on February 26.
Launched in October 2009, HAM’s equity fund has posted an absolute return of 17.2% since inception, according to Mutual Funds Association of Pakistan (Mufap) Yearbook 2012. The only comparable stock fund that was also launched in 2009 is Lakson Equity Fund, managed by Lakson Investments. It has posted an absolute return of 31.3% since its inception.
On the contrary, HAM’s fixed income fund has posted an absolute return of 60% since 2007, which is the year of its launch. At the end of fiscal 2012, it was 13th among Pakistan’s 29 income funds in terms of returns.
Azim believes that the manner in which benchmarks for cash and income funds are calculated in Pakistan is flawed. The procedure should be revised, he said, as it is confusing right now. “Mufap has taken up this issue with the SECP. I hope it is resolved soon.”
He said for the last one year he has been trying to develop a unique investment product with the help of insurance companies. If his idea materialises, investors will pay premiums during their active professional lives and enjoy access to unlimited medical care after retirement.
“I haven’t been successful so far. Reinsurance is the main problem,” he said, adding HAM will become the first company to come up with such an investment product.
Published in The Express Tribune, March 3rd, 2013.
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