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MUTUAL FUNDSAn Avenue for Savings and Investments
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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/Benefit
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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 betterservice
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
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Structure of Mutual Funds
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Structure of Mutual Funds
1. Funds are separate lega l ent it ies 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 f rom 1% p.a. to 3% p.a. of assets und er management
ISLAMIC FUNDS
MONEY MARKET
FUNDS INCOME FUNDS
STOCK FUNDS
BALANCE FUNDS
FUND MANAGEMENT
MANAGEMENT FEE
ASSETMANAGEMENT
COMPANY
ASSETALLOCATION
FUNDS
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Operations of Funds by Management Company & Trustee
MANAGEMENT
COMPANY
REGULATOR - SECP
TRUSTEE/
CUSTODIAN
INVES
TORS,
INSTITUTION
AL
/RETAIL
FUNDS /
SCHEMES
SALES
REDEMPTIONS
Bank Deposits
T-BillsTFCs
EquitiesRETURNS
INVESTMENTS
Manages all
investments in F unds
Al l Assets are in the
custody of the Trustee
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Types of Mutual Funds
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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
InvestmentTime
Investment Avenues
Banks T-BillsTFCs/
SukuksEquities
Money Market Very Low Short or Long Yes Yes No No
Income Moderate Medium Yes Yes Yes No
Balanced / AssetAllocation
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
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Status of Mutual Funds Industry in Pakistan
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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.
inBillion
GROWTH OF MUTUAL FUNDS IN PAKISTAN
Open-end Close-end
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Money
Market
37%
Income
31%
Equity
28%
Balanced
2%
Asset
Allocation
1%
Capital
Protected
1%
OPEN END FUNDS - CATEGORYWISE SIZE -
Rs. 299 Billion as on 31/12/2011
Equity
79%
Income
6%
Balanced
15%
CLOSE END FUNDS - CATEGORYWISE SIZE -
Rs.20 Billion as on 31/12/2011
Mutual Fund Industry in Pakistan
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179
368
180
222
261
3186.0%
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
Percentageof
BankDeposits
PakRs.
inB
illion
MUTUAL FUNDS VS BANK DEPOSITS - PAKISTAN
Mutual Fund Industry in Pakistan
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Status of Mutual Funds Industry Globally
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3,339
5,490
4,193
7,953
6,782 6,87614%
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
Percentage
ofB
ank
Deposits
IndianRupee
in
Tillion
MUTUAL FUND INDUSTRY VS BANK DEPOSITS - INDIA
Mutual Fund Industry in India
21
M t l F d I d t I di P ki t
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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 22.9523.12
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
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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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Equity
39%
Bond
24%
Money Market21%
Balanced/ Mixed
12%
Other/Unclassified
4%
PERCENT OF WORLDWISE MUTUAL FUND
ASSETS BY TYPE OF FUND, 2011:Q3
Worldwide Mutual Fund Assets
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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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Thank You