Marketing of Mutual Funds in Pakistan:

Opportunities & Challenges

By

Sohail Yaqoob

History of Mutual Funds in Pakistan

1962 - Government of Pakistan established NITL which launched first Open End Equity Fund in Pakistan – NIT

1966 - Government of Pakistan established ICP which launched series of Closed End Funds (25).

Only in the Mid 90s, the sprouts of mutual funds is witnessed

1994-95 - More funds launched in private sector

2006 - Total number of AMCs are 30 managing 56 mutual funds

Total Industry Size - Rs. 171 billion

(US$ 2.83 billion)

Total number of Funds - 56

Total number of AMC - 30

Rs. 41.33 bnClosed end

Rs. 129.73 bnOpen end

22Closed end

34Open end

29Private Sector

1Public Sector

Mutual Funds Industry in 2006

Major Market Players

National Investment Trust Ltd.

JS ABAMCO Ltd.

Arif Habib Investment Management Ltd.

Al Meezan Investment management Ltd.

Atlas Asset Management Ltd.

UBL Fund Managers Ltd.

Asset Management Companies in Pakistan

Mutual Funds in Pakistan

8

Year-wise Growth of Mutual Funds Since 2001

9

Total Mutual Funds Industry as % of GDP for the year 2005-2006

Source: State Bank of Pakistan

10

Mutual Funds Industry to Bank Deposits (September’ 2006)

Source: State Bank of Pakistan

First modern day mutual fund was opened in North America in 1924

The GREAT DEPRESSION of 1930s in USA has stalled the growth of mutual funds sector, like many other economic activities

Yet it was, 1990s that mutual funds became mainstream investments in the USA and around the globe

At the end of June 2006, total mutual fund assets all over the world were $ 19.413 trillion

History and Inception of Mutual Funds

Worldwide Mutual Fund Industry

Worldwide Mutual Fund Industry

Asia/Pacific Mutual Fund Industry

Islamic Mutual Fund Industry

One of the fastest growing sectors BUT

As compare to over all mutual fund industry, it is at infancy

stage of growth and development

The wider acceptance of equity funds by Shariah Scholars in early 1990s paved the way to launch Islamic mutual funds.

Currently, approximately 250 Islamic Institutions in some 75 countries, managing funds worth over USD $200 billion.

Comparison of Islamic vs World Wide

Mutual Fund Industry

Comparison of Pakistan’s vs. World Wide

Islamic Mutual Funds

17

Total Mutual Fund Industry in Pakistan - Rs. 171.00 bn

Size of Islamic Mutual Funds in Pakistan-Rs. 9.12 bn (5.33%)

18

Size of Islamic Mutual Fund in Pakistan - Rs. 9.114 bn

Market Share of Al Meezan Investments - Rs. 6.925 bn

19

Total Mutual Fund Industry in Pakistan - Rs. 171 bn

Market Share of Al Meezan Investments - Rs. 6.925 bn

as of September 30, 2006

• Controlled by Public Sector, initially

• Lack of awareness

• Interest rates were too high

• Education

• Distribution

Low savings

Why Mutual Funds lagging in Pakistan?

What is Mutual Fund?

What are different types of Mutual Funds?

Why an individual invest in Mutual Fund?

How can Mutual Funds be purchased?

How many people know?

Experienced and Professional Fund Management

Diversified portfolio

Economies of Scale

Liquidity

Convenient processing

Affordability

Transparency

Stringent regulator

What are the Advantages of investing in Mutual Funds?

Cont…

What should be done to become a significant contributor in the global market?

Putting collective efforts at industry level Comprehensive analysis of investors’ needs and preferences Education of People about mutual funds at mass level Product innovations by launching specialized products. Widening, broadening and deepening the markets Tapping overseas investor base

(Opportunities)

Cont…

What should be done to become a significant contributor in the global market?

Marketing in semi-urban and rural areas Improving quality of service Quick dissemination of information Banking and other related industries to utilize their network for mutual fund distribution Expanding distribution network by discovering non- non-traditional channel of distribution

(Opportunities)

Understanding the importance of retail market Separate funds for various investors’ segments. Promoting standardize performance measurement procedures at industry level Creating positive image about the fund and changing the nature of the market Better technology aiming at providing quality service

What should be done to become a significant contributor in the global market?

(Opportunities)

Advertisement through Print Media Newspapers Magazines

Advertisement through Electronic Media Television Radio

Outdoor Advertising Hoardings Banners

Cont…

How can Mutual Funds be marketed?

Direct Marketing Personal Selling Telemarketing Direct Mail to existing as well as potential investors

Below the line activities (BTL) Participation in exhibition Information desk as public places Arranging seminars - Corporate as well as Educational

Selling through Intermediaries/Distributors

Cont…

How can Mutual Funds be marketed?

Comprehensive website and link with other popular

websites Providing quick response to the Customers through

Distribution Centers Call Centers Emails

Providing up to the mark value addition services

How can Mutual Funds be marketed?

What about the target market?

Individuals Institution

Government Institutions Private Organizations Provident / Pension Funds

Trusts / Funds / Welfare Organizations Educational Institutions Overseas investors Semi-urban and rural Segment

What would be the appropriate marketing strategy for each segment?

Individuals

Indirect selling through distributor network and regular

campaigns through print and electronic media, exhibition

Institutions

Personalized and direct marketing

Trusts / Funds / Welfare Organizations

Direct selling as well as indirect selling through distributor

network and creating awareness through appropriate media

Cont…

What would be the appropriate marketing strategy for each segment?

Overseas investors Personalized and direct marketing, prompt and timely service,

website links, advertisement in foreign print media, seminars /

conferences, road shows

Educational Institutes Personalized and direct marketing

Semi-urban and rural Segment Electronic media, simplified literature in rural languages, visits by mobile vans with audio-visual aids, hoardings, wall paintings and educational films

Challenges for Mutual Fund Industry

Lack of diversified products range

Understanding of investors’ need

Public awareness at mass level

Un-stability of Stock Market

Dearth of liquid debt instruments

Protecting and maintaining the integrity and quality

Ensuring performance

Maintaining momentum to ensure viability

Providing competitive returns

Cont…

Challenges for Mutual Fund Industry

Mitigating the Risk involved Inadequate Intellectual Capital Comforting & convincing with bad past investment experiences Budgetary constraints for Marketing activities. Low saving and Investment oriented society Information disclosure and transparency Choosing appropriate distribution network Right timing to launch funds In time after sale activities Strict monitoring of regulators

Recommendations

Team work for the growth of mutual fund industry

Mass awareness and education about mutual funds

Strengthening distribution network

Understanding the fact that related financial industries are

not a threat Promoting healthy business practices and ethical code of

conduct Disseminating timely information Establishing affiliations with mutual funds associations in

other countries and promote one-to-one contacts Media should play a more supportive and constructive role

for awareness and disseminating information

The winning formula is the troika of performance, service and trust for

meeting long-term goals and

becoming a true success story in the

world’s financial markets.

Thank you