Up by 51 percent YoY in fiscal year 2012: Mutual funds industry reaches Rs 379 billion

The mutual funds industry remained in upward trajectory during FY12, as the Asset Under Management (AUM) posted a significant appreciation of 51 percent on year-on-year basis this year, analysts said. The growth momentum this year stood almost twice compared to the growth of 25 percent witnessed last year, they added.
"Major growth was witnessed in the size of income, money market, Islamic income and Islamic money market funds, which surged by 124 percent, 95 percent, 43 percent and 22 percent on year-on-year basis, respectively. An aerial view reveals that, major growth was witnessed in the AUM of the ABL Asset Management and NAFA Funds, which grew by solid 233 percent and 102 percent respectively during FY12.
"The main reason of such growth was induction of new funds under the umbrella of the company as well as appreciation in the size of income and money market funds of the respective fund managers", Mazhar A. Sabir, an analyst at InvestCap said. On quarter-on-quarter basis, the performance during the first quarter of FY12 stood relatively depress posting the decline of 1.2 percent during July-September 2012, however later three quarters of FY12 witnessed robust growth of average 15 percent of FY12 in the size of Mutual Fund Industry, he said.
However on monthly basis, the industry posted the decline of 3 percent to reach at Rs 379 billion, as compared with the figure of Rs 390 billion, a month ago. Out of Rs 11 billion redemption witnessed during the month, 70 percent contributed by three funds, namely ABL-Cash Fund (reduction: Rs 5.3 billion), UBL Liquidity Plus Fund (reduction: Rs 1.4 billion) and Meezan Cash Fund (reduction: Rs 1.1 billion).
During FY12, the fixed income funds category of open-ended funds registered an appreciation of a massive 124 percent on year-on-year basis to reach at Rs 87 billion and contributed 24 percent of the total open-ended size of the industry as compared to 17 percent contribution witnessed in FY11. However, on monthly basis, the fixed income funds category declined by 1 percent. On semi-annually basis, growth in income fund during the first half of FY12 stood at 41 percent while during second half of FY12 the category appreciated by 59 percent. On return basis during FY12, the income funds earned an average annualised return of 9.8 percent year-on-year basis, whereas the return of June 2012 (annualised) stood at 11.3 percent, declining by 3bps on month-on-month basis.
On quarterly basis, the income funds' return remained volatile and averaged at 8.7 percent during the fourth quarter of FY12, down by 18bps during the period.
After witnessing tremendous growth of more than 100 percent during the last two years, the money market funds maintained high pace upward trajectory with 95 percent on year-on-year basis growth in fund size during FY12. With the induction of two (2) new money market funds in the category, the net assets of the category reached to Rs 150 billion in June 2012, as compared to the June 2011 size of Rs 77 billion, becoming the largest category in the mutual funds industry.
The reason behind this phenomenal growth in money market funds was the investor's general preference for low risk better return product as provided by money market funds, he said. However, due to redemption effect of year end, the category size decline by 7 percent on month-on-month basis during June 2012.
During FY12, the money market funds category earned average return of 11.2 percent on year-on-year basis with June 2012 annualised return of 10.1 percent on month-on-month basis, lower than 50bps over the months. As SBP kept the discount rate at existing level since October 2011, the money market funds manager are shifting their investment in 6M papers and getting better returns from their investments of treasury bills.
The equity funds category remained stagnant standing at the same level of June 2011 of Rs 252 billion. However on monthly basis, the equity funds category size appreciated by 4 percent on month-on-month basis. On semi annually basis, equity fund has declined by 15 percent during the first half of FY12 while appreciated by 18 percent during the second half of FY12. The benchmark KSE-100 index gained 10.4 percent on year-on-year basis during FY12 from 12,496 levels in June 2011, closing at 13,801 in June 2012. The equity funds category posted an average return of 13.5 percent, outperforming the KSE-100 index by 320bps over the year. "The main reason for the out performance was superior return of AKDOPF (earned 32.3 percent), outperformed by 19 percent from equity fund category average return, and 22 percent from the KSE-100 index return," he said.
He said during the last three years, the mutual funds industry mostly depended on their fixed income funds (Money market and Islamic income funds) however, with the recent upsurge in the equity market, the equity related funds' portfolio increased their assets. The current interest rates scenario advocates that the investors preferred to invest in fixed income investment venues. "We expect that the SBP would keep the discount rate unchanged at 12 percent in the upcoming monetary policy for the next two months," he said. "In this manner, we believe that a short term placements' portfolio would be better choice of investment in current investment scenario," he added.