Post on 07-Apr-2018
8/4/2019 Investment Companies - Final
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Investment Companies
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Investment Companies(Part - 1)
By
Mohammad Samie
MBA2010-01
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Brief Revision
Revising Investment
Physical Assets excluded from the scope of
investments
Financial Assets include like:
The loan by Citibank to an individual
to purchase the car,
Bonds,
Ordinary Shares, etc.
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Types of Investors
Retail Investors VS Institutional Investors
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For Your Information
Muriel Siebert, known as "the first woman of
finance", is the president and founder of
Siebert Financial Corp. She was also the firstwoman to own a seat on the New York Stock
Exchange, and the first woman to serve as
superintendent of banks in the state of New
York.
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Investment Companies by Definition
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NOTE:
Please avoid confusion between
the shares of the mutual fund
and the shares in which the
fund managers may invest
the pooled up money of the fund.
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Companies Covered under this head
Mutual fund companies
Open Ended Mutual Fund Companies
Closed-Ended Mutual Fund Companies Unit Trust Companies
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Investment companies Generically
Insurance Companies
Pension Fund Companies Commercial Banks
are clustered under this head
To be focused
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Investment Companies VS Investment Banks
Fundamental focus varies
Investment banks primarily deal with:
Underwriting securities
Acting as primary dealers
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For your information
National Bank of Pakistan,
Standard Chartered Bank (Pakistan) Limited,
United Bank Limited,
Habib Bank Limited, JS Bank Limited,
Pak Oman Investment Co. Ltd.,
NIB Bank Limited,
Citibank N.A.,
MCB Bank Limited,
The Royal Bank of Scotland and
Faysal Bank Limited.
http://dailytimes.com.pk/default.asp?page=2010\06\30\story_30-6-2010_pg5_5
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Mutual Fund Companies
Heap up the investors money for shares
(units). Fund Managers execute funds management
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Mutual Fund Companies in Pakistan
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Open Ended Fund
Fund Managers manage it Open to new investments and withdrawals
A pro rata share with each investor
Net Asset Value (NAV) of the fund
NAV = Market Value of Securities Liabilities
No. of shares outstanding
NAV = 215,000,000 15,000,000
10,000,000
= Rs.20/share
When is NAV determined? And when investments andwithdrawals are be valued?
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Numerical Explanation How new shares would be issued?
When Portfolio price remains constant
When Portfolio price doesnt remains constant
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Rules Deduced
Number of shares would be increased when
net new investment is increased and vice
versa. NAV would change due to the change in price
of portfolio.
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Closed Ended Fund(in comparison with Open Ended Fund)
Subsequent investment and withdrawals
Subsequent Treatment of Shares Determination (Affected) of price per share
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Examples of Open and Closed Ended Fund
Fund Name Company Type
Meezan Sovereign Fund AL-MEEZAN INVESTMENT MANAGEMENT LTD Open-Ended Fund
Alfalah GHP Alfa Fund AL FALAH GHP INVESTMENT MANAGEMENT LTD Open-Ended Fund
Pakistan Income Fund ARIF HABIB INVESTMENT MANAGEMENT LTD Open-Ended Fund
Askari Income Fund ASKARI ASSET MANAGEMENT LTD. Open-Ended Fund
Al-Meezan Mutual Fund Ltd AL-MEEZAN INVESTMENT MANAGEMENT LTD Closed-Ended Fund
PICIC Energy Fund PICIC ASSET MANAGEMENT COMPANY LTD Closed-Ended Fund
Prudential Stock Fund PRUDENTIAL FUND MANAGEMENT LTD Closed-Ended Fund
WE Balanced Fund WE INVESTMENT MANAGEMENT LTD Closed-Ended Fund
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Unit Trust
Unit Certificates are fixed
Unlike open and closed ended funds, no active
management exercised
Unlike open and closed ended funds, have
fixed termination date
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Brief Benefits of Mutual Funds
Risk Reduction via Diversification
Saving of time, cost and efforts
Professional Management
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Parties Involved in a Mutual Fund
Fund Mangers/Investment Advisors
Distributors Custodian
Independent Public Accountants
Transfer Agents
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Charges of Mutual Funds
Sales Charges
Annual Operating Expenses
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Sales Charge
Also called as load
One time charge In which case is it charged?
In case where an intermediary
(sales agent) is involved
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Ways of Charging Load
Front End LoadDeduction at the time of
shares purchase
Back End Load - Deduction at the time of
shares redemption
Level Load - Constant load is charged each
year
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Annual Operating Expenses
Expenses charged annually
3 categories
Management Fee
Distribution Fee
Other Expenses
Note: Fee percentages vary from fund to fund and from company to
company.
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JiJi Time(Refreshment)
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Investment Companies(Part - 2)
By:
Muhammad Sohail ArshadMBA2010-07
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Insurance Companies
Financial Protection from the risk of loss
A contract between two parties in exchange for
consideration (Premium)
One party is ready to bear the risk (Insurance
Company)
Other party whose risk is being covered
(Policyholder)
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How Insurance Works?
Based on the principle of Risk Pooling
Example :
Houses in a village = 1000
Value of 1 House = Rs. 40,000/-
Houses burning in a yr = 5
Contribution = Rs. 300/-
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Premium
Amount paid to insurance for bearing of risk
Types of Premium
Single premium:
Fixed/level premium Flexible/adjustable premium
Premium on the basis of time period
Monthly
Quarterly Semiannually
Annually
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Types of Insurance
Life Insurance (Risk Insured Is Death)
Term Insurance
For A Specified Time Period
No Payouts If Policyholder Not Die No Cash Value
Cash Value Life Insurance
Whole Life Insurance
With Cash Value
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Contd
Health Insurance
Risk insured is medical treatment
Property & Casualty Insurance
Car insurance House or building insurance
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Contd
Liability Insurance Risk insured is litigation
Disability Insurance
Risk insured is inability of employed person to earn
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Contd
Investment Oriented Products
Guaranteed Investment Contract
In return of a single premium
Guaranteed owner principal repayment and a fixed orfloating interest rate
Annuity
Guaranteed rate of return buildup
Tax benefits if not withdrawn before maturity
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Insurance Company
Individual vs. Group insurance
Fundamental aspect of insurance company
Uncertainty in time and magnitude of payments
Long lag between receipts and payments
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Forms of Insurance Companies
Stock Insurance Company
Shareholder and policyholder are two separate elements
Mutual Insurance Company
Policyholders are owners of the company
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Three structural components
Home office component
Investment component
Distribution component
Structure of Insurance Company
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Income Vs Expense
Incomes
Primary Source Is Premiums
Secondary Source Is Investment Returns
Expenses Insurance Claims
Operating Expenses
Profits Difference Between Incomes And Expenses
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Understanding Pension Plan
Pension Plan
Contributions towards a Pool Of Funds (Pension
Fund)
Investment of pension fund
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Pension Fund Management
In-house Management
Financial Intermediaries (Pension Fund
Manager) Insurance Companies & Asset Management Companies
Regulatory Authority Is Securities and Exchange
Commission Of Pakistan(SECP)
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Types of Pension Plans
Qualified & Unqualified Pension Plans
Defined-benefit Plan
Defined-contribution Plan
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Types of Pension Plans
Defined-benefit Plan
Retirement benefits are guaranteed
No contribution from employee side
Specified contribution of employer
Example:
Gratuity
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Contribution of employer is pre defined
Retirement benefits are not guaranteed
No obligation for the performance of fund on
employer Investment options are selected by employees
Maintained on an individual account basis
Example:Provident Fund
Defined-contribution Plan
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Cash Balance Plan
Hybrid pension plan
Retirement benefits are pre-defined
Maintained on an individual account basis
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Superannuation funds (Pension):
Either Defined benefit or Defined Contribution Plan
Employee is paid when reaches superannuation age
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EMPLOYEE OLD AGE BENEFIT SCHEME (EOAB)
Private Sector Employees Scheme managed by the
Federal Government
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Regulation
License pension fund managers and authorizeschemes.
Measure performance against benchmarks.
Publish comparative performance.
Order special audit.
Carry out inquiry/inspection.
De-authorize manager and fund
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Regulation
Segregation Of Pension Fund
Equity Sub-fund
Debt Sub-fund
Money Market Sub-fund
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Investment Plans
Based On Proportion Of Each Sub Fund
Very Conservative (money Market & Debt Sub-fund)
Conservative ( Up To 80% Money Market And Debt Sub-fund)
Balanced (equitable Mix Of Three Sub-funds )
Aggressive (Up To 80% Equity Sub Fund)
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Charges & Deductions:
Management Fee Not To Exceed 1.5% PerAnnum
Front Load 3%
No Load On Transfers
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Investment Instruments:
Shares, Bonds,
Asset backed securities,
Stock mutual fund,
Bond mutual fund,
Income mutual fund,
Growth mutual fund, Income & growth mutual fund,
Fund of funds, etc.
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References
Book(s) and Report(s) consulted:
Foundation of Financial Markets and Institutions(Third Edition)
By:
Frank J. Fabozzi
Franco Modigliani
Frank J. Jones
Michael G. Ferri
Reporting Practices for the Private Pension SectorBy:
Mr. Hasnat Ahmad
(Securities and Exchange Commission of Pakistan)
Pension Mandate of Securities & ExchangeCommission of Pakistan
By:
Akif Saeed(Securities & Exchange Commission of Pakistan) [14 April2006]
Insurance Guide For Inventors Issued By SECP(Securities & Exchange Commission of Pakistan)
Websites:
www.investopedia.com
www.investorwords.com
www.dailytimes.com.pk
www.bloomberg.pk
www.mutualfundspakistan.com
www.hraide.com
www.profit.ndtv.com
www.eobi.gov.pk
www.secp.gov.pk
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