The local mutual funds industry showed a decent growth of 15 percent during the first half of FY12, in terms of the size, which has been over and above the 12 percent growth during first half FY11. The open-end funds rose by 19 percent, reaching at Rs 267 billion ($3.05 billion), while closed-end funds showed a significant decline of 21 percent to settle at Rs 20 billion ($0.23 billion).
During December 2011, the local mutual funds saw redemption of 5 percent on month-on-month basis, with major decline of 12 percent witnessed in the money market funds' category, which clocked in at Rs 105 billion ($1.20 billion). "December closing seems to be the main reason behind the industry-wide decline, as the banks and other financial institutions usually pull out funds from their investments especially from their short-term fixed income instruments to keep their balance sheets in decent shape", Mazhar A. Sabir, an analyst at InvestCap said.
He said that the equity related funds continued their declining trend in line with the negative spell that continued at the local bourses of the country. On the quarter-on-quarter basis, during the fourth quarter 2011, the mutual funds rose by 16 percent (10 percent in fourth quarter 2010), with a solid total increase of 29 percent on year-on-year during the year 2011 against decrease of 1 percent in 2010.
The income funds' size elevates by 41 percent in the first half of FY12, thanks to new entrants. The size of the fixed income funds' category increased by a massive 41 percent during the first half of FY12 (Jul-Dec11) to reach at Rs 55 billion ($0.63 billion), with meagre depreciation of less than 1 percent on month-on-month basis. However, on a cumulative basis, the size of the category appreciated by a healthy 30 percent in 2011, primarily owing to additions of four new income funds in CY11, he said.
After having witnessed a tremendous growth in size during the last 11 months of CY11, the money market funds category showed a decline of 12 percent on month-on-month basis to reach at Rs 105 billion ($1.20 billion) in December 2011. Major decline witnessed in the size of ABL Cash Fund, which declined by 45 percent on month-on-month basis.
December closing was the main reason for decline in the fund size of the category during the month. However, in CY11, the money market funds increased by more than 100 percent with a handsome growth of 36 percent on half-year basis in funds size during the first half of FY12 (July-Dec11).
Since equity funds category is mainly dependant on the equity index where equity markets remained in the negative zone during CY11, the equity funds also declined by 11 percent on year-on-year basis, as against the KSE-100 index's negative return of 5.5 percent during the year. In December 2011, the equity funds declined by 4 percent on month-on-month basis, while category's size shrank by 15 percent on half-year basis in the first half of FY12.
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