Mad March: Investors battered as all equity funds lose ground

Poor performance was in tandem with fall of share market.

KARACHI:

The month of March was bad news for people who have invested in listed securities through asset management companies: each of the 22 equity-based conventional mutual funds operating in Pakistan posted a negative return in March, according to data compiled by the Mutual Funds Association of Pakistan (Mufap).

Net asset values of each of the 22 conventional equity funds decreased substantially during March, resulting in heavy losses for mutual funds’ investors.

The poor performance of equity funds was in tandem with the southward direction of the share market that recorded one of the highest one-month declines in March. One of the many reasons for it was the heavy selling by mutual funds during the month in order to meet redemption requests from their clients, analysts said.

The Karachi Stock Exchange (KSE)-100 Index stood at 30,233.87 points at the end of March, down 10.1% from the beginning of the month. It was one of the 11 spells in which the KSE-100 Index dropped by more than 10% during the last decade, according to research conducted by Topline Securities.



The KSE-100 Index is not only the principal performance yardstick for the overall stock market, but also serves as the benchmark for many conventional equity funds. The month-on-month decline in NAVs of 10 out of the 22 funds at the end of March was worse than the corresponding decrease of 10.1% in the KSE-100 Index, MUFAP data shows.

Returns of 11 equity funds, although negative in absolute terms, were better than the decline in the benchmark index last month.

The month-on-month decline in the NAV of PIML Value Equity Fund was not available, as Primus Investment Management launched the fund on March 13.

According to AKD Securities analyst Asad Siddiqui, the stock market performance in March was the worst in the last 58 months. Mutual funds sold shares amounting to $56 million last month while foreign selling clocked up at $71.4 million, he said.

All but one of the 32 sectors listed on the KSE recorded negative returns in March while each of the 10 major sectors that collectively represent 88% of the market capitalisation closed the month in negative territory, Siddiqui added.

Many large asset management companies run capital-protected funds that are structured in a way that they must reduce their equity exposure in a bearish market. Offloading of shares in massive quantities by mutual funds in March put further pressure on the benchmark index, which has dropped more than 12% since its peak at the end of February.

The recent bearish trend in the stock market is in contrast with its bull run in 2014 when Pakistan was the third best market in the world with 33.7% dollar-based returns.

The best-performing equity-based mutual fund in March was PICIC Energy Fund, which posted an absolute return of -6.72%%. It was followed by PICIC Stock Fund (-7.25%).

Worst performing conventional equity funds in March were United Stock Advantage Fund (-12.16%), National Investment Unit Trust (-11.62%) and JS Growth Fund (-11.16%).

Published in The Express Tribune, April 2^nd, 2015.

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