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introduction

• Ihsanullah (4320)

• Ajab Khan (4318)

• K.Obaidullah (4317)

• Samiullah (4319)

• Zainullah (4321)

Mutual Funds

FOLLOWING ARE THE CONTENTS OF MY PRESENTATION

Introduction & Concept of Mutual funds.

Working of Mutual funds.

History & Phases of Mutual funds.

Structure & Flow of Mutual funds.

Types of Mutual Funds.

Mutual Fund Performance.

Mutual fundand its Concept

An old Axiom :

“It is not wise to put all eggs into one basket”

……… was probably in the minds of those who formed the first mutual fund.

Why did Mutual Funds come into existence?

Mutual Funds

• A Mutual Fund is a trust that pools together the savings of a number of investors who share a common financial goal.

• The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

Mutual Funds

Mutual FundsProfessional Fund Managers•MBA’s•CA’s

The Investor

Investments•Stocks • Money Markets •Bank Deposits

Characteristics of Mutual funds:

• An outstanding long term return for the past 5, 10, and 20 years.

• Low Expenses.• Diversification• No Loads.• Long Term Records.• High ethical standards and reputation.

History of Mutual Funds

The first mutual fund was established in Europe.

First mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868.

Mutual funds were introduced into the United States in the 1890s. They became popular during the 1920s.

In 1893, the first closed-end fund “The Boston Personal Property Trust” was formed.

In Pakistan National Investment Trust (NIT) offered first open end fund in 1962.

ICP offered a series of closed end funds in 1966, these were later privatized in 2000.

History of Mutual Funds

Pool their money with

INVESTORS

FUND MANAGERS

Passed back to

Generate

SECURITIES

Invest in

RETURNS

How Mutual Fund works?

Flow of Mutual Funds

Investors

Fund

Securities

Return

Given back to

That generates Which is invested in

Pool their money in

Mutual Funds Operations

PERFORMANCE OF MUTUAL FUND COMPANIES OF PAKISTAN

STRUCTURE BACKGROUND

Open end and closed end funds are established through a trust deed as a trust under the trust act 1888.

Investment Company is established as a limited liability company.

Operated by two parties i.e. fund manager and the trustee or custodian.

Central Depository Company (CDC) largest trustee of mutual funds in Pakistan with almost 90% of the market share.

Securities and Exchange Commission of Pakistan (SECP) through Non-bank financial companies (NBFCs) Regulations 2008 regulates the mutual fund industry.

Mutual fundTypes

TYPES OF MUTUAL FUNDS ON THE BASES OF STRUCTURE

Open ended Funds. Closed ended Funds.

Open End:-Continuously offer and redeem their units to the investors.

Closed End:-One time issuance of certificates and then are traded in the secondary market.

Investment Company:-One time issuance of shares and then are traded in the secondary market.

TYPES OF MUTUAL FUNDS ON THE BASES OF STRUCTURE

A type of mutual fund, where there are no restrictions on the amount of shares the fund will issue.

If demand is high enough, the fund will continue to issue shares no matter how many investors there are.

Open-end funds also buy back shares when investors wish to sell.

It's important to understand that each mutual fund has different risks and rewards.

Open ended Funds

In general, the higher the potential return, the higher the risk of loss.

Although some funds are less risky than others, all funds have some level of risk - it's never possible to diversify away all the risk. This is a fact for all investments.

Open ended Funds

Closed End Funds have a predetermined and fixed number of shares outstanding.

Closed-end funds behave more like stocks because they trade on an exchange and the price is determined by market demand after an initial public offering (IPO) process.

Closed-end funds can be traded below their net asset value or above.

Close ended Funds

The closed-end fund "company" still has its own stock, which is traded on an exchange and trades above or below its underlying value, or net asset value (NAV), in this case.

They also trade according to market demands. Every seller must have a buyer.

Close ended Funds

Primary Markets are the markets in which corporations raise new capital. When securities are sold for the first time directly from the issuer it is a transaction in the primary market.

Primary Markets

Total Industry Size - Rs. 171 billion

(US$ 2.83 billion)

Total number of Funds - 56

Total number of Mutual Funds -30

Open end Rs. 129.73 bnClosed end Rs. 41.33 bn

Open end 34Closed end 22

Public Sector 1Private Sector 29

Mutual Funds Industry in 2006

Benefits OF Mutual Funds

Professional Management:-Expertise to manage and reinvest interest or dividend income, or to investigate thousands of securities. Access to extensive research, market information, and skilled securities traders.

Liquidity:-Mutual fund can be bought and sold on any business day, so investors have easy access to their money.

Benefits OF Mutual Funds

Diversification:- Securities from hundreds or even thousands of issuers it reduces

the risk of loss.

Convenience:- Mutual funds offer services that make investing easier. Mail,

telephone, or the Internet. Automatic investments into a fund or automatic transfers from a fund to your bank account.

MARKET RISK: Sometimes prices and yields of all securities rise and fall. Inflation Risk: Inflation is the loss of purchasing power over time.

POLITICAL/GOVERNMENT POLICY RISK: Changes in government policy and political decision can change the investment environment.

LIQUIDITY RISK: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.

RISK FACTORS OF MUTUAL FUNDS

25 28 30 35 40 50 60

StartCareer

Marriage

BuyAutomobile

BuyHouse

Children’sEducation

Daughter’sMarriage

Retirement

AGE

Why Invest?

Mutual fundin Pakistan

Controlled by Public Sector, initially.

Lack of awareness.

Interest rates were too high.

Education.

Distribution.

Low savings.

Why Mutual Funds are not developed in Pakistan?

The National Investment (Unit) Trust is Pakistan’s largest and oldest Mutual Fund. As on June 30, 2009, NIUT had funds under management of around Rs. 28 billion invested in over 430 listed companies and had approximately 56,000 unit holders

Mutual Funds were introduced in Pakistan in 1962, with the public offering of National Investment (Unit) Trust (NIT) which is an open-end mutual fund in the public sector. This was followed by the establishment of the Investment Corporation of Pakistan (ICP) in 1966, which offered a series of closed-end mutual funds

Mutual Funds Industry in Pakistan

Continue…

• Currently there exists one open end (NIT) mutual fund in public sector. Twelve open-ended and fourteen closed-ended mutual funds under private sector management, and there are many more Funds in the pipeline

by: Gurmeet Singh

NATIONAL INVESTMENT TRUST

NBP FULLERTON ASSET MANAGEMENT LIMITED

ABAMCO LIMITED

AL FALAH GHP INVESTMENT MANAGEMENT

AL-MEEZAN INVESTMENT MANAGEMENT LIMITED

.

Mutual Funds Corporation in Pakistan

ARIF HABIB INVESTMENT MANAGEMENT LTD.

ASIAN CAPITAL MANAGEMENT (PVT.) LTD

ASKARI ASSET MANAGEMENT LTD.

by: Gurmeet Singh

Mutual Funds Corporation in Pakistan

Mutual fundExamples in Pakistan

by: Gurmeet Singh

Meezan Islamic Fund (MIF) is not only the largest Shariah compliant equity fund but also the largest Equity Fund in private sector in Pakistan.

MIF invests in combination of income and growth stocks of Shariah compliant companies with demonstrated track record of profitability and stable dividend payout history.

Meezan Islamic Fund

Risk Diversification:-

MIF reduce the risk of volatility of prices by investing your money in a well defined portfolio of securities.

Cost Efficiencies:-

The per unit research and execution costs of a fund manager are also lower due to the large size of portfolio under management.

Salient Features Of MIF

Professional Management:-

Our fund managers are trained investment professionals. Their knowledge provides you and opportunity to earn greater risk adjusted returns. Also by investing in MIF, you pass on the job of continuous monitoring and evaluation of investment opportunities to the Fund manager.

Healthy Return:-

Apart from tax benefit, MIF also provides you a healthy return on your investment.

Salient Features Of MIF

Tax Credit:-

Investment in MIF enables you to get tax benefit up to Rs. 232,500/- in case of salaried person or up to Rs 272,250/- on investments up to Rs. 1,000,000.

Affordability:-

A minimum investment of Rs. 5,000 makes MIF an affordable investment for small investors. Subsequent investments can be made with a minimum amount of Rs. 1,000. There is no cap on maximum amount of investment

Salient Features Of MIF

Fund Statistics:

Fund Type Equity

Launch Date 8-Aug-03

Trustee Central Depository Company

Benchmark KMI-30 Index

Auditors KPMG Taseer Hadi & Co.

Management Fee 2 %

Front End Load 2%

Listing KSE

Status of Funds

Description 30 June 2005

30 June 2006

30 June 2007

30 June 2008

30 June 2009

30 June 2010

30 June 2011

Dividend Per Unit Rs. 7.50 17.50 17.50 15.60 10.00 - 9.00 10.00

% of Face Value(i.e., Rs. 50/ Unit) 

15.00%

35.00%

35.00%

31.20%

20.00% - 18.00

%20.00%

% of Opening NAV

15.00%

32.15%

29.81%

26.61%

16.70% - 25.51

%26.90%

Dividend History