‘The mutual fund industry is growing on a daily basis’

Zeeshan Muhammad Quddus is a Chartered Accountant, having qualified in 2003, after completing his article-ship from Ernst & Young. Zeeshan has a diversified experience of working in areas such as Finance, Operations, Business Development and Strategic Planning.

Prior to joining UBL Funds, he had been associated with many prestigious organizations such as Arif Habib Investments, Al-Meezan Investments and NBP Fullerton Asset Management.  Zeeshan also served on various committees including the Tax committee of MUFAP and the Economic advisory committee of the Institute of Chartered Accountants of Pakistan. Zeeshan Quddus joined UBL Fund Managers as the Chief Risk Officer, and now is the Chief Business Development Officer and Head of Marketing.

BR Research recently discussed with Zeeshan, issues and happening surrounding the mutual fund industry and UBL Fund Managers’ plans and strategies going forward. Below are edited excerpts of the conversation.

BR Research: What is the general situation of the industry in terms of growth?

Zeeshan Muhammad Quddus: The asset management industry has seen exponential growth in the last decade. Currently, AMCs in Pakistan are managing more than Rs705 billion of investors’ money. This is a very positive sign and shows that more and more people are now investing their savings with mutual funds.

That said, I still believe that there is a lot that still needs to be done to make the general public more aware of the potential returns on savings through mutual funds and various other benefits that the investor can get by investing in mutual funds and voluntary pension schemes, such as tax credit.

BRR: What are your strategies for FY18-19?

 ZMQ: UBL Fund Managers’ focus is to provide innovative investment solutions to its investors. Products through which our investors can get the maximum benefits of potential growth in their savings. Keeping the same vision in mind, we plan to introduce further tranches of Islamic Active Allocation Plans, for which have received a very positive responses from our investors.

Our last tranch of Islamic Active Allocation Plan, i.e. Al-Ameen Active Allocation Plan VIII broke all records of IPO in the industry and generated phenomenal AUMs of Rs5.3 billion which is by far the highest IPO closing made by any AMC in Pakistan for an active allocation plan. Currently our Al-Ameen Active Allocation Plan IX is open for subscription by the general public.

The focus of Islamic Active Allocation Plan is to provide investors with potentially high returns through active allocation of Investors money in Islamic Equity and Islamic Money Market mutual funds which is done by our professional fund managers and under supervision of our renowned Shariah Board.

We also plan to launch a few other funds to cater to the requirements of our investors, across the country.

BRR: What particular sectors do you like in terms of growth and profitability?

ZMQ: Pakistan’s economy has witnessed positive growth rate in the past four years. The inclusion of Pakistan in emerging market by MSCI, initiation of CPEC projects and declining trend of oil prices have all resulted in the growth of Pakistan’s economy and a continuous decline in inflation rate. If we talk about a specific sector which has a positive outlook, currently we feel that cement and steel sectors are good, because of increased infrastructure spending by corporates, individuals, and government in Pakistan. Further due to the positive outlook of Pakistan economy, we are witnessing that foreign investors are showing interest in energy, telecom and financial sector which is a very positive sign.

 BRR: What is the size of your clientele and how has the growth been?

ZMQ: Currently, UBL Funds is proud to manage an investor base of over 60,000 investors. These investors range from individuals, corporates, SMEs, High Networth Individuals and Large corporate organizations. UBL Funds also manages SMAs and discretionary portfolios for different High networth and corporate clients.  We also have a very strong presence in UAE and Qatar, where we manage investments for Non-Resident Pakistanis.

BRR: What is the average size per client investment?

SMQ: Size of investment varies from customer to customer. The positive about investing with UBL Funds is that you can start your investments from as low as Rs500 and there is no limit to a maximum investment.

BRR: What are you doing to enhance reach of mutual funds? 

SMQ: UBL Funds currently has 21 branches all across Pakistan. Out of these 21 branches, we have 6 dedicated Al Ameen branches that provide only Shariah compliant investment solutions to investors.

It is part of our strategy to increase the number of branches and sales representative all across Pakistan so that we can enhance the reach of mutual funds in the country. Moreover, UBL Fund Managers’ products are also available in all UBL Bank branches, which further widen our reach.

BRR: Why do you think there is lack of awareness amongst general public regarding mutual funds? 

SMQ: The mutual fund industry is growing on a daily basis, and is gathering speed with each passing day.  The successful closing of our Al-Ameen Islamic Active Allocation Plan-VIII stands as a testament to that.  As we move forward, we are continuously trying to reach out to more people - inside and outside of urban cities.  This past month, UBL Funds has launched 7 new investment centers across the country - in cities including Gujranwala, Jhelum and Faisalabad, in an effort to further enhance accessibility and increase awareness outside of Tier-1 cities.

With our increasing network, our potential investors now have more avenues where they can go to and have their investing queries answered instantly. Outside of the physical spaces, we are also working tirelessly on our digital platforms to increase awareness and help the audiences online with their questions and conceptions about the mutual funds industry.

BRR: Does a rising equity market help in attracting more customers? 

SMQ: One of the major misconceptions the general public has is that mutual funds mean investments in stock/equity market. The fact is that there are various types of mutual funds available to public which may include funds based on equity market, income/money market, commodity market etc.

The rise in equity market does help in improving the returns of our equity based products and hence the attraction for the particular funds usually rises when the stock market is performing well. We guide our investors to take a long term perspective of their investments to gain better and competitive returns.

BRR: Do you recommend different type of funds according to investor profile? How do you convey the risk aspect of investing?

SMQ: We have a defined process of evaluating the risk appetite of our customer. Our sales representative asks various questions from the investor to judge their risk-taking capabilities. Along with that, we have a detailed questionnaire which is filled by the customer. After evaluating the risk of the customer, we then offer them a product which suits their investments needs.

BRR: What is your view on equity market and the overall economy? 

SMQ: The market has been in a bearish mood for over a month now, losing 8 percent in June and cumulatively declining by 14 percent from the peak in May. The local bourse has witnessed a net foreign investment outflow of $332 million during 1HCY17 with the gap being mostly filled by institutional investors, mainly mutual funds and insurance companies.

Foreign selling pressure mostly amplified by the end of May-17, where reclassification into MSCI Emerging Market space led to net foreign investment outflows contrary to market expectations. Given the recent fall has made the market comparatively attractive vis-à-vis emerging market peers, it may attract foreign EM flows over the medium term.

The correction has been more pronounced in most of the blue chip sectors, where industry dynamics remain lucrative and demand strong due to infrastructure spending, strong consumption growth and improved energy supply. Sectors such as cements, steel, automobiles offer attractive growth opportunities while fertilizer, banks, oil & gas and power sectors offer handsome yields.

Nonetheless, the stock market may exhibit some more volatility over the next few days, taking direction from daily news flow and developments on the Panama Case rather than strong market fundamentals.

We reiterate that notwithstanding any short-term hiccups, we expect the stock market to deliver healthy return in the medium-term, with our view premised on a variety of factors. These include: Pakistan’s improving macroeconomic outlook i.e. improving energy situation, rising GDP growth rate, low inflation and a hitherto manageable overall external account position, attractive stock market valuations as captured in forward Price to Earnings ratio of 9.0 times and dividend yield of 4.5 percent, low yields on fixed income avenues amid contained inflationary pressures, strong double digit corporate profitability growth, and strong local institutional interest in the stock market amid ample available liquidity.