Arif Habib features among world’s best performing equity funds

Three funds run by the company were among world’s 100 best in 2012.

KARACHI: It is quite a big deal for an asset management company (AMC) to have one of its funds ranked among the country’s top performing equity funds. Having one’s fund rated as one of the best performing equity funds worldwide is an even bigger achievement.

But no feat could possibly be more astonishing for a Pakistani AMC to have as many as three of its funds included in the list of 100 best performing equity funds of the world in a single year. Arif Habib Investments – a subsidiary of MCB Bank – did all of the above in 2012.

According to Thomson Reuters Lipper, which provides information and commentary on the mutual funds industry worldwide, 15 out of the 100 best performing equity funds in 2012 belonged to Pakistan.

Three of these 15 funds – namely, Pakistan Pension Fund-Equity Sub Fund (60.3% returns in 2012), MCB Dynamic Stock Fund (54.5%) and Pakistan Islamic Pension Fund-Equity Sub Fund (55.7%) – are managed by Arif Habib Investments.



The analysis of Thomson Reuters Lipper is based on data from 27,431 global equity funds that were actively managed in 2012.

As on March 21, assets under management of Arif Habib Investments were Rs34.9 billion, which means that the company enjoys a share of 11.1% in total assets of the mutual funds industry of Pakistan.

Speaking to The Express Tribune in an interview, Arif Habib Investments CEO Yasir Qadri said less than 10% of his company’s assets under management are currently invested in equities. The share of fixed income funds that are moderately risky and offer lower returns than equity funds is 42%.

The rest of the company’s assets under management are invested in money market funds, which offer low but guaranteed returns, he added.

Triggers

Qadri believes one major reason for better corporate results in many KSE-100 Index companies during 2012 is rupee depreciation, which benefitted export-oriented and energy-sector firms in particular. He adds the government resorted to heavy borrowing from the central bank consistently for many years, which inadvertently created liquidity in the system and eventually pushed stock prices up.

“Markets perform well as long as there is liquidity. In a perverse kind of way, rupee depreciation as well as government borrowing helped our market grow in 2012,” he observes.

Future outlook

Like most stock market commentators, Qadri believes there is a good chance the KSE-100 Index may keep surging in coming months. However, the reasons he cites for a further rise in the benchmark index are quite different.

“The single largest variable will be the new government’s handling of fiscal issues. If it continues to exhibit fiscal irresponsibility, I predict the market will keep performing well,” Qadri says, adding the index may touch 24,000 points in this scenario.

“The mismatch of expenses and revenues will be dealt through borrowing from the central bank. Thus, the system will remain liquid, and the rupee will keep depreciating. Overall, it will be miserable for the economy, but may not be so bad for the market,” he says.

In the best-case scenario, Qadri says Pakistan may join the IMF programme, resulting in foreign lenders and donors injecting liquidity into the economy.

“Pakistan may get funding for mega development projects, which will create jobs and generate economic activity,” he says, adding such a scenario will be good for the market as well as the economy.

Alternatively, if the new government happens to be fiscally responsible, it will try to minimise the fiscal imbalance by increasing revenues and/or decreasing expenses. “In this case, while taxpayers will be made to pay higher taxes to increase revenues, the most likely cut on the expenditure side will be in the Public Sector Development Programme,” he says, adding such a policy will be bad for the market at least in the short run.

“As analysts, our job is to keep a close watch on developing stories to understand what the likely scenario will be. It will not be in black and white. There will be shades of grey,” he says.

Published in The Express Tribune, March 22^nd, 2013.

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