2
Contents
- Introduction/Benefit
- Structure of Mutual Funds
- Types of Mutual Funds
- Status of Mutual Fund Industry in Pakistan
- Status of Mutual Fund Industry Globally
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Introduction to Mutual Fund
What is a Mutual Fund? Mutual fund is a pool of money belonging to a group of investors, who entrust it
to a Fund Manager for making prudent investments on their behalf, strictly in
accordance with the Investment Guidelines as laid down in the Constitutive
Documents of the Fund.
Key Advantages of Investing in Mutual Funds • Professional Investment Management
• Diversification
• Convenience and Flexibility
• Liquidity and Easy Withdrawal
• Regulatory Protection
• Protection through Trustee
• Taxation Benefits
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Advantages of Money Market Funds (MMFs)
Versus Bank Deposits & NSS
• Money Market Funds (MMFs) are like a current account of a bank –
withdraw any time without penalty
• MMFs returns are much higher than bank deposits. Average bank
deposit rate is 6% p.a., average return on MMFs is 10.5% p.a..
• The return of about 10% p.a. is even better than Term-Deposits
• Unlike NSS, there are no penalties on withdrawals, and much better
service
• Tax credits of up to Rs. 100,000 on open end mutual funds and
unlimited on pension funds, if investment horizon is longer than one
year versus 10% tax on bank deposits and some NSS Schemes
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Tax Benefits
Mutual Funds required to withhold CGT as per below: – 10% for less than 6 months holding
– 8% for 6 to 12 months holding
– Zero for more than 12 months holding
– Capital Gains separate block of income with full & final tax liability.
Corporate Entities: – Tax savings of 25%-35% as compared to bank deposits
Individuals: – Tax savings of 0-10% as compared to bank deposits
– Tax Rebates upto Rs.100,000/- on open end funds and unlimited on Pension Funds
Structure of Mutual Funds
1. Funds are separate legal entities owned by the investors
2. The AMC simply manages the funds on behalf of investors and charge a fee for that
3. Management fee ranges from 1% p.a. to 3% p.a. of assets under management
ISLAMIC FUNDS
MONEY MARKET
FUNDS INCOME FUNDS
STOCK FUNDS
BALANCE FUNDS
FUND MANAGEMENT
MANAGEMENT FEE
ASSET
MANAGEMENT
COMPANY
ASSET
ALLOCATION
FUNDS
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Operations of Funds by Management Company & Trustee
MANAGEMENT
COMPANY
REGULATOR - SECP
TRUSTEE/
CUSTODIAN
INV
EST
OR
S,
INST
ITU
TIO
NA
L /
RE
TA
IL
FUNDS /
SCHEMES
SALES
REDEMPTIONS
• Bank Deposits
• T-Bills
• TFCs
• Equities RETURNS
INVESTMENTS
Manages all
investments in Funds
All Assets are in the
custody of the Trustee
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Types of Mutual Funds
Conventional/Shariah Compliant Funds
Open-end / Closed-end
Sub-categories of Mutual Funds • Money Market Funds
• Income Funds
• Asset Allocation Funds
• Balanced Funds
• Equity Funds
• Sector Specific Funds
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Basic Characteristics of Mutual Funds
Fund Category Volatility/
Risk
Investment
Time
Investment Avenues
Banks T-Bills TFCs/
Sukuks Equities
Money Market Very Low Short or Long Yes Yes No No
Income Moderate Medium Yes Yes Yes No
Balanced / Asset
Allocation Moderate Medium-Long Yes Yes Yes Yes
Equity High Long Yes Yes No Yes
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How to choose a Mutual Fund?
• Rating/Quality of Sponsors
• Rating of Asset Management Company (AMC)
• Rating of Fund
• Highly Qualified & Experienced Management Team
• Successful Performance Track Record
• Ethical Reputation of the Management
• Disciplined Investment Methodology
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• All investments in mutual funds are subject to market risks
• The NAV based prices of units and any dividend/returns
thereon are dependant on forces affecting the financial
markets. These may go up and down on market conditions
• Past performance is not necessarily indicative of future
results
• Please read offering document of the fund to understand the
investment policies and the risk involved
Risk Disclaimer
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How to Start Investing?
• Determine your objectives of savings/investments which includes
- Return needs
- Time horizon
- Liquidity needs
- Risk Profiling of Investor
• Ask yourself whether you are an aggressive, moderate or a conservative
investor
• Select the mutual fund manager you trust
• Select the fund which you want to invest
• Monitor your investments on periodic basis
Mutual Fund Industry in Pakistan
132
305
159
191
237
299
4763
2131
24 20
-
50.0
100.0
150.0
200.0
250.0
300.0
350.0
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Rs
. in
Billio
n
GROWTH OF MUTUAL FUNDS IN PAKISTAN
Open-end Close-end
17
Money
Market37%
Income
31%
Equity28%
Balanced
2%
Asset Allocation
1%
Capital Protected
1%
OPEN END FUNDS - CATEGORYWISE SIZE -Rs. 299 Billion as on 31/12/2011
Equity 79%
Income6%
Balanced15%
CLOSE END FUNDS - CATEGORYWISE SIZE -Rs.20 Billion as on 31/12/2011
Mutual Fund Industry in Pakistan
179
368
180
222
261
318 6.0%
10.3%
4.7%5.1%
5.1%
5.4%
0%
3%
6%
9%
12%
-
100
200
300
400
500
600
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Perc
en
tag
e o
f B
an
k D
ep
osit
s
Pak R
s. in
Billio
n
MUTUAL FUNDS VS BANK DEPOSITS - PAKISTAN
Mutual Fund Industry in Pakistan
3,339
5,490
4,193
7,953
6,782 6,876 14%
18%
11%
18%
13%
12%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Perc
en
tag
e o
f B
an
k D
ep
osit
s
Ind
ian
Ru
pee i
n T
illi
on
MUTUAL FUND INDUSTRY VS BANK DEPOSITS - INDIA
Mutual Fund Industry in India
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14.2%
18.0%
11.4%
18.3%
13.3%
11.8%
6.0%
10.3%
4.7%5.1% 5.1% 5.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11
MUTUAL FUND AS % OF BANK DEPOSIT - INDIA VS PAKISTAN
India Pakistan
Mutual Fund Industry – India vs Pakistan
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Worldwide Mutual Fund Assets
18.9218.16
20.34
22.38 22.95 23.12
21.44
23.7024.70
25.62 25.93
23.13
-
5.0
10.0
15.0
20.0
25.0
30.0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
WORLDWIDE MUTUAL FUND ASSETSTrillios of U.S. dollars, end of quarter
2008 2009 2010 2011
23
11,004
9,043
5,868 5,638
4,933 4,746
3,0192,693
-
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
2011: Q2 2011: Q3 2011: Q2 2011: Q3 2011: Q2 2011: Q3 2011: Q2 2011: Q3
WORLDWIDE MUTUAL FUND ASSETSBillions of U.S. dollars, end of quarter
MoneyMarketEquity Bond Balanced/ Mixed
Worldwide Mutual Fund Assets
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Equity39%
Bond24%
Money Market21%
Balanced/ Mixed12%
Other/ Unclassified
4%
PERCENT OF WORLDWISE MUTUAL FUNDASSETS BY TYPE OF FUND, 2011:Q3
Worldwide Mutual Fund Assets
25
Worldwide Mutual Fund Assets
PERCENT OF WORLDWIDE MUTUAL FUND ASSET
BY REGION, 2011:Q3
Africa
Asia/Pacific,
13%
Europe, 32%
America, 55%
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