AKD Investment Management Ltd has launched first of its kind mutual fund in Pakistan -- AKD Index Tracker Fund -- which would give access to hedging/diversifying investment tools used in all major global financial markets.
Faisal Bengali, Chief Executive of AKD Investment Management, at a press conference on Monday said that 100 percent of the Fund''s capital was invested in equities with the weightage of holdings reflecting that in the underlying index.
Syed Sadiq Hussain, chief investment officer explained that funds would be deployed in the market over the next three months, at the end of which the Index Tracker Fund would track the index to 96 percent accuracy.
The Chief Investment Officer said that an index fund gives the investors much more transparency as the investors know what they exactly hold in their portfolio at any time, as opposed to mutual funds that are required to report their holdings only twice a year.
"The Index fund provides the best possible diversification within the underlying index. No fund manager can otherwise afford to buy all stocks in an index," he added.
Index tracker funds historically trade within a 1-2 percent disparity band around their NAV. A large disparity between the NAV and Index tracker fund''s trading price creates an arbitrage for stock portfolio holders who can simply sell their stock and buy the index tracker fund at cheaper prices.
Sadiq said that historical performance of index funds on global level was a proof of the instrument''s potential. Currently, there is approximately $9 trillion invested in index tracker funds globally, with the world''s top 100 fund managers having 27 percent of their portfolio invested in Index funds. Index funds were successfully introduced in India more than six years ago, with UTI Tracker Fund being the first, and it has grown to an impressive of 20 billion Indian rupees entity. Index funds have outperformed over 70 percent of actively managed funds. An index fund''s return is the target benchmark for fund managers globally.
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