KARACHI: Not many CEOs have the courage to speak in definitive terms while discussing medium-term growth targets of their companies.
But Mir Muhammad Ali, CEO of UBL Fund Managers, which is currently the fourth largest asset management company in Pakistan’s private sector, is candid about his company’s future prospects. “In the next three years, our plan is to double the size of our company,” Ali told The Express Tribune in a recent interview.
At the end of June, UBL Fund Managers had Rs33.9 billion in assets under management, a key measure of the size of an asset management company. It means that UBL Fund Managers had a share of 9.4% in the mutual fund industry of Pakistan, whose size was a little more than Rs360 billion at the time.
“We should be either the largest or the second largest asset management company in Pakistan in terms of assets under management within three years,” he said.
Currently, the largest player in Pakistan’s mutual funds industry is government-owned National Investment Trust (NIT), whose market share was 15.5% with Rs54.6 billion of assets under management. In the private sector, however, top three asset management companies are Al Meezan Investments, NBP Fullerton Asset Management (NAFA) and MCB-Arif Habib Savings and Investments with market shares of 12.8%, 12.5% and 10%, respectively.
“The single most important challenge for us will be to maintain our operational excellence and customer services, which will come under pressure if the size of our company increases 100% in just three years,” Ali said.
But with the backing of one of the largest Pakistani banks that has 1,200 branches, should not UBL Fund Managers be the country’s largest private-sector mutual fund already?
“For the last three years, our assets under management belonging to retail clients have been growing at an average of 25% annually. Although our bank has withdrawn a substantial amount from our fund after a change in tax rates last year, our growth has been steady,” he said.
Banks manage their excess liquidity through mutual funds in the short term. But capital gains tax (CGT) rates were changed last year that made their investment in money market funds unviable. The CGT is 35% if banks keep their money in mutual funds for less than a year, but the rate declines to 10% for investments that are made for more than a year.
Of Rs33.8 billion, roughly Rs7 billion, or 20%, belongs to United Bank, the parent company of UBL Funds Managers. In contrast, almost 50% assets of one of the main competitors of Ali’s company belong to its parent banking institution.
Speaking about the challenges in the distribution of mutual funds through bank branches, Ali said it is true that the distribution strategy of United Bank with regard to mutual funds is ‘not very focused’ at the moment. “It’s more focused on its own deposit products. That’s because if a branch manager has deposit as well as mutual fund targets, he’s most likely to try to meet the deposit target first,” Ali said.
He added that the trend is changing gradually with the introduction of many improvements in customer services, such as investing in mutual funds through the website and call centres.
Ali says his asset management company foresees bullish trends to continue in oil and gas, food, textile and cement sectors. “By the end of the year, I’m foreseeing an index of 27,000 points,” he said, suggesting a rise in the KSE-100 Index by over 15% by the end of December.
Published in The Express Tribune, July 20th, 2013.
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