Investments work as a bridge between savings and economic growth for which development of efficient capital markets is essential. Mutual funds world over play a key role in this process and usually constitute more than 100% of the banking sector deposits whereas in Pakistan they constitute only 4% of the banking sector deposits.
MUTUAL FUNDS REQUIRE CERTAIN KEY INGREDIENTS TO THRIVE IN THE ECONOMIC ENVIRONMENT WHICH ARE:
-- Well developed robust regulatory environment
-- Well developed and liquid securities markets
-- High standards of corporate governance
-- Implementation of standard ethics across the board
Previously these ingredients were lacking in our capital markets and along with higher NSS and Bank deposits rates Mutual Fund sector could not grow. However, NSS and bank deposit have been rationalised and Pakistani bourses have attained a justifiable value on the back of improved economic performance.
For an individual investor it is difficult to obtain the requisite expertise and information to select the appropriate mix of stocks and time the decisions accordingly to optimise returns and that's where the rationale for investing in Mutual Funds strengthens. Moreover, advantages like professional management, corporate information, lower transaction costs and portfolio diversification makes the case for investing in mutual funds instead of undertaking stock investment on stand alone bases.
Pakistan Industrial Credit & Investment Corporation (PICIC) being one of the pioneer and largest Development Financial Institution (DFI) timely identified the potential in Mutual Funds sector and subsequently acquired two closed end mutual funds i.e. ICP MUTUAL FUNDS LOT 'B' comprising of thirteen funds viz: 2nd, 5th, 6th, 7th, 9th, 10th, 13th, 14th, 16th, 17th, 18th, 22nd, and 24th on October 24, 2002 [Management Rights Transfer Agreement (MRTA) dated December 13, 2002] and ICP-State Enterprises Mutual Fund-SEMF on March 22, 2003 (MRTA dated May 03, 2003).
Moving further PICIC realised the potential in local capital markets and decided to raise the capital of the recently acquired funds for effective value creation. Subsequently, paid-up capital of ICP-SEMF was raised by 50% and ICP LOT 'B' by 147% through bonus and right offerings. Enhancement in capital base was followed by even better market performance and value creation as per our expectations.
PICIC ASSET MANAGEMENT COMPANY LIMITED: PICIC Asset Management Company Limited is a wholly owned subsidiary of Pakistan Industrial Credit & Investment Corporation Limited (PICIC) with an authorised capital of Rs 50,000 million and paid-up capital of Rs 3,000 million. The formation of PICIC Asset Management Company Limited by PICIC under the provisions of Non Banking Finance Companies (Establishment and Regulation) Rules, 2003 to undertake asset management and investment advisory services was part of a coherent strategy to dedicate focused resources for development and evolution of these expertise in an institutionalised manner to strengthen its future endeavours.
INCORPORATION & COMMENCEMENT OF BUSINESS: On June 04, 2004 PICIC Asset Management Company Limited was incorporated under the companies ordinance, 1984 (XLVII of 1984) and thereafter commenced business on June 25, 2004
TRANSFER OF MANAGEMENT RIGHTS OF PGF AND PIF: Subsequently, on June 28, 2004 the management rights of PICIC Growth Fund-PGF (formerly ICP State Enterprises Mutual Fund-SEMF) and PICIC Investment Fund-PIF (formerly ICP Mutual Funds Lot 'B') were transferred to PICIC Asset Management Company Limited.
OPERATIONS: Full Fledged Operations were initiated from July 01, 2004 as PICIC AMC started its fund management endeavour with two funds having Net Assets Value (NAV) of Rs 13,000 million approximately and at present is one of the largest fund manager (closed end) with NAV of Rs 16,000 million with both the funds listed at all the three stock exchanges i.e. Karachi, Lahore and Islamabad.
PICIC AMC'S VISION & MOTIVE: PICIC AMC has started with a vision to provide a diverse set of investment products according to the investment and risk appetite off all the investor segments, establishing it as the largest fund manager in Pakistan. PICIC Asset Management Company Ltd would Insha -Allah continue to emphasise on maximising shareholders value and is adamant for seizing all emerging opportunities to ameliorate the shareholders' interest.
MANAGEMENT: The company is being headed by a team of dedicated professionals who have excelled in their respective careers and offers a unique mix of experience and young potential so that a collective and focused effort can be made towards realisation of our vision.
PICIC AMC is focused upon developing expertise in the field of investment management and in the process would endeavour to enhance fees based income by increasing the assets under management through:
-- Launching various types of closed-end and open-end schemes
-- Provision of Investment Advisory Services to the large corporates for effective investment management by changing fixed fees.
-- Managing Provident and Pension Funds of other organisation by charging fixed fees.
-- Active fund management for increasing the Net Asset Values of the funds under management.
PERFORMANCE OF FUNDS UNDER MANAGEMENT: A 4-Year CAGR of 23% (Rights adjusted) in Net Assets Value, 4-Year CAGR of 37% in dividends paid speaks itself for the performance of fund under our management. Based on the current market price the Certificate is yielding approximately 23% surpassing all other investment yields in the market. A consistent dividend policy imbibes the kind of confidence in the certificate holders which helps in enhancing its participation in the overall investment management sector.
One of the primary reasons for this substantial improvement in performance is the active fund management undertaken by the team of our professionals. This has resulted in fully capitalising upon the information flow prevalent in the market on either side.
PICIC GROWTH FUND-PGF (formerly ICP-SEMF)A 4-year CAGR of 23% (rights adjusted) in Net Assets Value, 4-year CAGR of 20% in dividends paid speaks itself for the performance of fund under our management. Moreover, the discount to NAV has also registered a significant reduction since we acquired the fund. The fund provides a mix a privatisation plays, dividend oriented scrips and turnaround stories which adds to the overall value created for the Certificate Holders.
PICIC AMC truly believes in the potential growth of the mutual funds sector and would capitalise upon it by offering a diverse set of investment products according to the investment and risk appetite of all the investor segments, establishing it as the largest fund manager in Pakistan. PICIC Asset Management Company Ltd will be launching a series of closed-end and open-end schemes which would add further innovation to the existing set of products, providing new opportunities for the common man to reap benefits of the capital markets development.
(The writer is Company Secretary, PICIC Asset Management Company Limited)
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