National Investment Trust (NIT) has, this year, paid dividend at Rs 2.55 per unit Rs 4 billion to its unit holders to create a new record in its 42-year history. The performance of NIT can be appreciated as 'remarkable' on two counts.
First, it was just three years back that the Trust had been struggling for survival on back of poor performance, consecutively. Second, marketing a public sector fund in very competitive market had not been an easy task.
Turning the tables in just three years has prompted analysts to see what went so favourable for NIT that: its NAV increased by 66.6 percent in the financial year 2003-04 (surpassed KSE at 55.2 percent), net assets rose to Rs 53.597 billion etc. To cut short, the Trust posted a significant growth across-the-board.
Achievement of these numbers in very short span, has also led to some suggestions thrown in the market: 'whether it was boom in stock market that had led the historic growth in NIT'.
These suggestions, however, proved more or less 'shorts in the air'. As experts view proved it is very difficult for fund like NIT to sell its units when the stock market is booming.
It is easier to sell a unit at lower price, but very difficult when price appreciates significantly.
This was in the case of NIT. NIT per unit price had soared to Rs 36 per unit. So it does not provide basis to the argument that NIT growth was led by market boom. This could have been true, had the per unit price of NIT at Rs 7-8 as in the past. Selling a unit at Rs 36 was not that easy.
All analysis reach the conclusion (also openly declared by NIT's new management), 'it is strategic allocation, active portfolio management and diversification of its investment portfolio that has yielded record income for NIT and thereby the highest ever payout to its unit holders'.
Elaborating this strategy, new management at the time of taking over had made clear that it would look for pockets that generate higher return to its investments. And to pursue this, it would even go for gradual replacement of under performing sectors.
The strategy paid off NIT more than probably the management had anticipated. This also took analysts by surprise and prompted them to analyse cores of this strategy.
This reveals that pursuance of this strategy started with restructuring and reorganisation at different levels in management. During the last about three years, the Trust has overhauled all its 250 boards, appointed competitive persons from relevant sectors through internationally applied selection criterion.
Another significant step, promptly taken by NIT was implementation and promotion of 'good corporate governance' principles, as being pursued by SEC. NIT was successful in implementing complete code of corporate governance at all levels. This includes hiring-firing and operational matters.
The main focus of the divestment strategy, however, has been sector-wise performance review of its investment portfolio over the years. For the purpose, NIT had placed investment experts at top for close monitoring of each and every sector. Going forward, the Trust created a databank - which contains complete profile of each sector. This gives NIT exact performance picture of all sectors; facilitates in 'strategic' investment by replacing lower with higher yield sectors and determine future scope.
NIT portfolio has its investment diversification to all sectors and at all ratios. There could be perception that NIT strategy focused 'buy on dip and sell on rise'. This, however, is not true. Trust went for buying and selling at all ratios prevalent at certain sector at a particular time. For example, its textile sector portfolio contains companies shares purchased at falling as well as soaring prices.
As a result of a revolutionary programme NIT has re-established itself as the market leader and has also secured the interest of investors and it has improved the value and yields of its investors.