mutual fund.pdf

7/27/2019 Mutual Fund.pdf

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MUTUAL FUNDSAn Avenue for Savings and Investments


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Contents

- Introduction/Benefit- Structure of Mutual Funds

- Types of Mutual Funds

- Status of Mutual Fund Industry in Pakistan

- Status of Mutual Fund Industry Globally


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Introduction/Benefit


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Introduction to Mutual Fund

What is a Mutual Fund?Mutual fund is a pool of money belonging to a group of investors, who entrust it

to a Fund Manager for making prudent investments on their behalf, strictly in

accordance with the Investment Guidelines as laid down in the Constitutive

Documents of the Fund.

Key Advantages of Investing in Mutual Funds Professional Investment Management

Diversification

Convenience and Flexibility

Liquidity and Easy Withdrawal Regulatory Protection

Protection through Trustee

Taxation Benefits


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Advantages of Money Market Funds (MMFs)

Versus Bank Deposits & NSS

Money Market Funds (MMFs) are like a current account of a bank

withdraw any time without penalty

MMFs returns are much higher than bank deposits. Average bank

deposit rate is 6% p.a., average return on MMFs is 10.5% p.a..

The return of about 10% p.a. is even better than Term-Deposits

Unlike NSS, there are no penalties on withdrawals, and much betterservice

Tax credits of up to Rs. 100,000 on open end mutual funds and

unlimited on pension funds, if investment horizon is longer than one

year versus 10% tax on bank deposits and some NSS Schemes


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Tax Benefits

Mutual Funds required to withhold CGT as per below: 10% for less than 6 months holding

8% for 6 to 12 months holding

Zero for more than 12 months holding

Capital Gains separate block of income with full & final tax liability.

Corporate Entities: Tax savings of 25%-35% as compared to bank deposits

Individuals: Tax savings of 0-10% as compared to bank deposits

Tax Rebates upto Rs.100,000/- on open end funds and unlimited on Pension

Funds


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Structure of Mutual Funds


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Structure of Mutual Funds

1. Funds are separate lega l ent it ies owned by the investors

2. The AMC simply manages the funds on behalf of investors and charge a fee for that

3 . Management fee ranges f rom 1% p.a. to 3% p.a. of assets und er management

ISLAMIC FUNDS

MONEY MARKET

FUNDS INCOME FUNDS

STOCK FUNDS

BALANCE FUNDS

FUND MANAGEMENT

MANAGEMENT FEE

ASSETMANAGEMENT

COMPANY

ASSETALLOCATION

FUNDS

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Operations of Funds by Management Company & Trustee

MANAGEMENT

COMPANY

REGULATOR - SECP

TRUSTEE/

CUSTODIAN

INVES

TORS,

INSTITUTION

AL

/RETAIL

FUNDS /

SCHEMES

SALES

REDEMPTIONS

Bank Deposits

T-BillsTFCs

EquitiesRETURNS

INVESTMENTS

Manages all

investments in F unds

Al l Assets are in the

custody of the Trustee

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Types of Mutual Funds


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Types of Mutual Funds

Conventional/Shariah Compliant Funds

Open-end / Closed-end

Sub-categories of Mutual Funds

Money Market Funds Income Funds

Asset Allocation Funds

Balanced Funds

Equity Funds

Sector Specific Funds


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Basic Characteristics of Mutual Funds

Fund Category Volatility/Risk

InvestmentTime

Investment Avenues

Banks T-BillsTFCs/

SukuksEquities

Money Market Very Low Short or Long Yes Yes No No

Income Moderate Medium Yes Yes Yes No

Balanced / AssetAllocation

Moderate Medium-Long Yes Yes Yes Yes

Equity High Long Yes Yes No Yes


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How to choose a Mutual Fund?

Rating/Quality of Sponsors

Rating of Asset Management Company (AMC)

Rating of Fund

Highly Qualified & Experienced Management Team

Successful Performance Track Record

Ethical Reputation of the Management

Disciplined Investment Methodology


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All investments in mutual funds are subject to market risks

The NAV based prices of units and any dividend/returns

thereon are dependant on forces affecting the financial

markets. These may go up and down on market conditions

Past performance is not necessarily indicative of future

results

Please read offering document of the fund to understand the

investment policies and the risk involved

Risk Disclaimer


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How to Start Investing?

Determine your objectives of savings/investments which includes- Return needs

- Time horizon

- Liquidity needs

- Risk Profiling of Investor

Ask yourself whether you are an aggressive, moderate or a conservative

investor

Select the mutual fund manager you trust

Select the fund which you want to invest

Monitor your investments on periodic basis


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Status of Mutual Funds Industry in Pakistan


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Mutual Fund Industry in Pakistan

132

305

159

191

237

299

4763

2131 24 20

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Rs.

inBillion

GROWTH OF MUTUAL FUNDS IN PAKISTAN

Open-end Close-end

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Money

Market

37%

Income

31%

Equity

28%

Balanced

2%

Asset

Allocation

1%

Capital

Protected

1%

OPEN END FUNDS - CATEGORYWISE SIZE -

Rs. 299 Billion as on 31/12/2011

Equity

79%

Income

6%

Balanced

15%

CLOSE END FUNDS - CATEGORYWISE SIZE -

Rs.20 Billion as on 31/12/2011



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179

368

180

222

261

3186.0%

10.3%

4.7%5.1%

5.1%

5.4%

0%

3%

6%

9%

12%

-

100

200

300

400

500

600


Percentageof

BankDeposits

PakRs.

inB

illion

MUTUAL FUNDS VS BANK DEPOSITS - PAKISTAN



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Status of Mutual Funds Industry Globally


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3,339

5,490

4,193

7,953

6,782 6,87614%

18%

11%

18%

13%

12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


Percentage

ofB

ank

Deposits

IndianRupee

in

Tillion

MUTUAL FUND INDUSTRY VS BANK DEPOSITS - INDIA

Mutual Fund Industry in India

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M t l F d I d t I di P ki t


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14.2%

18.0%

11.4%

18.3%

13.3%

11.8%

6.0%

10.3%

4.7%5.1% 5.1% 5.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11

MUTUAL FUND AS % OF BANK DEPOSIT - INDIA VS PAKISTAN

India Pakistan

Mutual Fund Industry India vs Pakistan

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Worldwide Mutual Fund Assets

18.9218.16

20.34

22.38 22.9523.12

21.44

23.7024.70

25.62 25.93

23.13

-

5.0

10.0

15.0

20.0

25.0

30.0

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

WORLDWIDE MUTUAL FUND ASSETSTrillios of U.S. dollars, end of quarter

2008 2009 2010 2011

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11,004

9,043

5,868 5,638

4,933 4,746

3,0192,693

-

2,000.0

4,000.0

6,000.0

8,000.0

10,000.0

12,000.0

2011: Q2 2011: Q3 2011: Q2 2011: Q3 2011: Q2 2011: Q3 2011: Q2 2011: Q3

WORLDWIDE MUTUAL FUND ASSETSBillions of U.S. dollars, end of quarter

MoneyMarketEquity Bond Balanced/ Mixed


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Equity

39%

Bond

24%

Money Market21%

Balanced/ Mixed

12%

Other/Unclassified

4%

PERCENT OF WORLDWISE MUTUAL FUND

ASSETS BY TYPE OF FUND, 2011:Q3


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PERCENT OF WORLDWIDE MUTUAL FUND ASSET

BY REGION, 2011:Q3

Africa

Asia/Pacific,

13%

Europe, 32%

America, 55%

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