FUND MANAGER’S REPORT Jun · FUND MANAGER’S REPORT Jun‘12 For the fiscal year 2011-12 policy...

Jun‘12FUND MANAGER’S REPORT

For the fiscal year 2011-12 policy makers have succeeded in containing inflation within the targetannual period average CPI of 11%. Declining commodity prices coupled with plummeting internationaloil prices were primarily responsible for shaping inflationary levels over FY12. Although battling pricelevels across the economy after the consecutive floods in 2010 and 2011 was a daunting task for thegovernment, prudent macroeconomic engineering and ingenious statistical reconfiguration paved theway for economic smoothening. Looking forward over FY13, inflationary concerns certainly loom onprospects of crude oil shocks owing to the Iran oil Embargo.On the external front, robust growth in remittances (USD 12bn) and lower than expected trade deficitprovided the much needed respite to the burgeoning current account deficit (11MFY12 USD 3.7bn).Moreover, on the fiscal side domestic resources were employed in the absence of budgetedinternational support for deficit monetization, further exacerbating the fiscal imbalance. Nonetheless,restoration of NATO supplies and renewed ties with the US are likely to reinstate the financialassistance from allies and international bodies – relieving pressure on the fiscal account. In addition tothe payments already made against the IMF Stand-By Agreement in Feb 2012, Pakistan honored thelast payment of USD108mn for FY12 in June. The payments caused an anticipated depletion ofreserves, weakening PKR by 9.8% over FY12. In order for the government to follow the repaymentschedule in the upcoming quarters without disrupting macroeconomic fundamentals, policy makers willhave to ensure availability of funds from external resources, employ revenue generating measuresand at the same time curtail expenditure. Together, these measures will ensure uptake in realeconomic growth.

The money market remained relatively liquid in comparison to previous year’s stimulated demandduring fiscal year end. Relentless growth in M2 and increase in banking deposits relieved somepressure on market liquidity and enabled the Central bank to curtail the size of Open MarketOperations (OMOs) in the outgoing month. Furthermore, flows under coalition support fund areanticipated to drive market liquidity and push yields downward. In addition to external flows, success intaming inflationary pressure would also determine the magnitude of downturn in yields – which haveremained elevated at historical levels over last two quarters. There is, however, some uncertaintyregarding the interest rate outlook as the downward spiraling inflation signals discount rate cuts whileplans of approaching the IMF hint at a potential hikes in the key interest rate. Keeping in view theuncertainty, institutional investors are expected to remain invested in shorter tenor instruments untilfurther clarity from policy makers.

MUFAP’s recommended format

ECONOMIC OUTLOOK

MONEY MARKET REVIEW

EQUITY MARKET REVIEWThe equity market remained muted during June, with average volumes registering a MoM decline of58% (to reach 81mn shares) and the index recording a negligible return of 0.11% MoM.Dampening macroeconomic climate and political commotion were primarily responsible for thelackluster performance as domestic and foreign investors reacted negatively to the excess volatility.During the month, foreign investors divested USD 109mn from the bourse primarily on account of Pak-NATO deadlock, increased devaluation of PKR and political instability. Moreover, despite integration ofthe CGT Ordinance within the Finance Bill and reduction in income tax on the salaried class, BudgetFY13 failed to buoy the market after a dispirited month of May.While widening current account deficit, PKR depreciation and slippages in fiscal deficit dented investorsentiments on one front; the friction between the executive and the judiciary on account of presidentialinquiry for Swiss Bank Accounts marred political perception on the other end. The disqualification ofPrime Minister Gilani by the Supreme Court also failed to lift investor confidence as the authenticity ofthe Budget and the Finance Bill passed by the Parliament earlier during the month came into questionpost court verdict.The market did witness a reversal from the bearish territory to close marginally in the green based onexpectations of resolution of the Pak-NATO deadlock. With the evidence at hand, we anticipate aneventual resumption of NATO supplies via Pakistan and anticipate a pre-confirmation equity rally in theoffing over the coming month.

Ret

urns

(MoM

)

Investment ObjectiveFaysal Money Market Fund (FMMF) seeks to provide stable and competitivereturns in line with the money markets exhibiting low volatility consistent withcapital preservation by constructing a liquid portfolio of low risk short terminvestments yielding competitive returns.

Fund

Info

rmat

ion

Fund Type Open EndedCategory Money Market SchemeStability Rating AA+(f) (JCRVIS)Risk Profile low Launch Date 13th December 2010Custodian/Trustee CDCAuditor Ernst & Young Ford Rhodes Sidat HyderManagement Fee 10% of Gross Earning or minimum 1.25% of

Net AssetsFront/Back end Load NilMin Subscription PKR 5,000Benchmark 50% 3 month T-Bills and 50% Average 3

months deposit rate of AA rated and above banks

Pricing Mechanism BackwardDealing Days Monday-FridayCut-Off Timing 9am-5pmAMC Rating AM3+ (JCRVIS)NAV per Unit (PKR) 102.87Net Assets (PKR mn) 1,639.45Leverage Nil

Ris

k-qu

ants

Alpha -0.002%Standard Deviation 0.0352%VaR 0.0579%Sortino N/AInformation Ratio 0.0765Weighted Average Maturity (Days) 32

Inve

stm

ent C

omm

ittee

Enam Khan Chief Executive Officer

Mansoor Khalil Chief Operating Officer

Najam Ul Hassan Head of Risk Management

Ayub Khuhro Acting Head of Research

Vasseh Ahmed Senior Portfolio Manager

Imran Altaf (Fixed Income) Acting Fund Manager

Syed Shahid Iqbal (Fixed Income) Fund Manager

(CAGR Annualized % p.a) Jun’12 May’12

Fund

Ret

urns FY12 to Date 10.98 11.00

Month-on Month 10.39 10.48

Since Inception 11.18 11.23

Benchmark (YTD) 9.98 9.93

Ass

et

Qua

lity

(% o

f Tot

al

Ass

ets)

Government Securities 57.61AAA 0.31AA+ 11.52AA 29.27

(Holding Period Annualized % p.a) Jun' 12 May' 12

Fund

R

etur

ns FY12 to Date 10.98 10.96

Month-on-Month 9.92 10.01


Asset Allocation (% of Total Assets)

Performance ReviewIn the outgoing month, exposure in T-Bills was reduced from 64% to 58%, while idle cash was reduced from 8% to 2% in order to takeadvantage of attractive returns offered by financial institutions via TDRs/COIs/LOPs at quarter end. Nonetheless, yields in money marketwere not stretched significantly due to excess liquidity prevalent in the market. Going forward, we anticipate yields to recede keeping in viewthe expectation of revival of Nato supply and flows from coalition support fund. During the outgoing month the liquidity of your fund improvedfrom 45 days to 32 days without hampering returns. With prudent fund management your fund outperformed its benchmark by 97bps andremains tuned to deliver attractive and competitive returns.

Jun’12 May’12

The Scheme has maintained provisions against Workers' Welfare Fund liability to the tune of Rs. 3,511,780 if the same were not made the NAVper unit/ return of the Scheme would have been higher by Rs.0.22 (0.21%). For details investors are advised to read note 10.2 of latest financialstatements

FMMF Vs Benchmark

Ret

urns

(MoM

)

Investment ObjectiveTo generate competitive returns by investing primarily in debt and fixed income instruments having investment grade credit rating.

Fund

Info

rmat

ion

Fund Type Open EndedCategory Income schemeStability Rating A+(f) (JCRVIS)Risk Profile LowLaunch Date 12th May 2007Custodian/Trustee CDCAuditor A.F Ferguson & Co.Management Fee 1.50%Front/Back end Load NilMin Subscription PKR 5,000Benchmark 75% 6M KIBOR & 25% 3M PKRV Pricing Mechanism ForwardDealing Days Monday-FridayCut-Off Timing 9am-5pmAMC Rating AM3+ (JCRVIS)NAV per Unit (PKR) 103.26Net Assets(PKR mn) 1,726.45Leverage Nil

Ris

k-qu

ants Alpha 0.001%

Standard Deviation 0.0539%VaR 0.0886%Sortino -0.5252Information Ratio -0.2142Weighted Average Maturity (Days) 44

(CAGR Annualized % p.a) Jun' 12 May' 12

Fund

R

etur

ns FY12 to Date 11.14 11.13Month-on Month 10.87 10.70Since Inception 11.35 11.35Benchmark 12.33 12.36

Ass

et Q

ualit

y (%

of T

otal

A

sset

s)

Government Securities 29.06AA+ 16.81AA 34.19AA- 16.75A 1.31

(Holding Period Annualized % p.a) Jun' 12 May' 12

Fund

R

etur

ns

FY12 to Date 11.14 11.08Month-on-Month 10.37 10.21Benchmark (YTD) 12.33 12.36Asset Allocation (% of Total Assets)

Jun’12 May’12

Performance ReviewOver June, your fund yielded 10.37%, locking the FY12-YTD return at 11.14%. Considering the quarter end, portfolio was skewed towardshigh yielding TDR placements with AA- and better rated banks whereas exposure in T-bills was reduced. This strategy is likely to enhancethe returns and reduce the volatility going forward. Nevertheless, portfolio duration was kept low in anticipation of monetary tightening at anypoint owing to the vulnerable economic scenario. We shall continue to explore low risk and less volatile investment avenues while activelylooking for lucrative trading opportunities.

Inve

stm

ent C

omm

ittee Enam Khan Chief Executive Officer

Mansoor Khalil Chief Operating Officers






FSGF Vs Benchmark

The Scheme has maintained provisions against Workers' Welfare Fund liability to the tune of Rs. 45,577,854, if the same were not made the NAVper unit / return of the Scheme would have been higher by Rs. 2.73 (2.64%). For details investors are advised to read note 8.1 of latest financialstatements.

Non Compliance

Name of Instrument Rating required Existing Rating Type of Instrument Total exposure % of Net Assets % of Total Assets

HUBCO BBB- AA+ Commercial Paper 300,000,000 17.38 16.81

*Management has seeked relaxation from SECP to regularize the exposure till maturity, reply of which is awaited.

Ret

urns

(MoM

)

Investment ObjectiveFaysal Islamic Savings Growth Fund (FISGF) seeks to provide maximumpossible preservation of capital and a reasonable rate of return via investing inShariah Complaint money market and debt securities having good creditquality rating and liquidity

Fund

Info

rmat

ion

Fund Type Open EndedCategory Islamic Income SchemeStability Rating A+(f) (JVR-VIS)Risk Profile low Launch Date 14th June 2010Custodian/Trustee CDCAuditor Ernst & Young Ford Rhodes Sidat HyderManagement Fee 1.50%Front/Back end Load NilMin Subscription PKR 5,000Benchmark Average 6M deposit rate of 3 Islamic BanksPricing Mechanism ForwardDealing Days Monday-FridayCut-Off Timing 9am-5pmAMC Rating AM3+ (JCRVIS)NAV per Unit (PKR) 103.00Net Assets (PKR mn) 536.52Leverage Nil

Ris

k-qu

ants Alpha -0.0041%

Standard Deviation 0.0725%VaR 0.1192%Sortino -0.7262Information Ratio 0.1115Weighted Average Maturity (Days) 143

Inve

stm

ent C

omm

ittee

Enam Khan Chief Executive Officer







(CAGR Annualized % p.a) Jun’12 May’12

Fund

R

etur

ns FY12 to Date 11.24 11.25

Month-on Month 10.77 9.83

Since Inception 10.03 10.00


Ass

et Q

ualit

y(%

of T

otal

A

sset

s)Government Securities 18.46AAA 0.75AA+ 9.23AA 69.75A 0.01

(Holding Period Annualized % p.a) May'12 May'12

Fund

R

etur

ns FY12 to Date 11.24 11.20

Month-on-Month 10.27 9.41

Benchmark (YTD) 8.7 8.71Asset Allocation (% of Total Assets)

Jun’12 May’12

Performance ReviewYour fund yielded a monthly return of 10.27% in June, leading to FY12 return of 11.24% on the back of investments in high-yield CPSukuks and upward price revision in Corporate Sukuks. We are pleased to inform our unit holders that this is your fund’s highest historicalreturn since inception. Moreover, the management’s strategy to reduce concentration in GoP Ijarah Sukuks and diversify across otheravenues finally reached its performance culmination as the fund stood at the top of its peer-group, out-pacing the remaining ten fundswithin the Islamic Income Category. Your fund continues to seek optimal yields and performance stability through investments in IslamicTDRs, Sukuks, CP Sukuks and Daily Bank Products.

The Scheme has maintained provisions against Workers' Welfare Fund liability to the tune of Rs. 1,587,077, if the same were not made the NAV perunit / return of the Scheme would have been higher by Rs. 0.30 (0.30%). For details investors are advised to read note 10.2 of latest financialstatements.

FISGF Vs Benchmark

Ret

urns

(MoM

)

Askari TFC 4 4.77

Kohat Cement 2.10

Telecard 0.19

Investment ObjectiveFaysal Income & Growth Fund (FIGF) seeks to provide its investors withoptimal yields through a diversified portfolio consisting of both long-termfixed instruments as well as short–term money market securities.

TFC

/SU

KU

K

Hol

ding

s

(as

% o

f T.

Ass

ets) Askari TFC 4 4.80

Kohat Cement 2.11

Fund

Info

rmat

ion

Fund Type Open EndedCategory Aggressive Income FundStability Rating A(f) (JCRVIS)Risk Profile MediumLaunch Date 10th October 2005Custodian/Trustee CDCAuditor A.F Ferguson & Co.Management Fee 1.50%Front End Load 1%Back End Load Nil Min Subscription PKR 5,000Benchmark 90% 1 Yr KIBOR and 10% average of most

recent published 3 month deposit rates of top 3 scheduled Commercial Bank by deposit size

Pricing Mechanism ForwardDealing Days Monday-FridayCut-Off Timing 9am-5pmAMC Rating AM3+ (JCRVIS)NAV per Unit (PKR) 107.11Net Assets (PKR mn) 530.54Leverage Nil

Inve

stm

ent C

omm








Asset Allocation (% of Total Assets)Jun’12 May’12

Performance ReviewDuring the month of June, your fund yielded a modest return of 8.03% taking FY12 return to 13.55%. Exposure in FI placements wasenhanced in order to capitalize on the high yields offered by financial institutions on account of fiscal year-end liquidity demand. Investmentsin T-Bills on the other hand were reduced as higher yields were available across COIs, LOPs and TDRs.It is a privilege for the management to inform its unit-holders that this is the fund’s highest historical return on a YTD basis. Rest assured thatyour fund continues to seek optimal yields through a fully diversified portfolio along with exploration of high-yield and high credit qualitycorporate bonds, ensuring the sustainability of the high yield trajectory path the fund is tuned towards..

Fund

R

etur

ns (Holding Period Annualized %

p.a) Jun’12 May’12

FY12 to Date 13.55 13.91Month-on-Month 8.03 -4.74Benchmark (YTD) 12.24 12.25

Fund

R

etur

ns

(CAGR Annualized % p.a) Jun’12 May’12FY12 to date 13.55 13.98Month-on Month 8.33 -4.64Since Inception 10.72 10.75Benchmark (YTD) 12.24 12.25

Ris

k-qu

ants

Alpha 0.0083%

Standard Deviation 0.1444%VaR 0.2376%Sortino 0.6477Information Ratio 0.0124Weighted Average Maturity (Years) 1.55

Ass

et Q

ualit

y(%

of T

otal

A

sset

s)

Government Securities 29.91

AA+ 13.64

AA 24.25

AA- 22.84

NR 2.11

The Scheme has maintained provisions against Workers’ Welfare Fund liability to the tune of Rs. 5,289,570, if the same were not made the NAV perunit / return of the Scheme would have been higher by Rs.1.07 (1.00%). For details investors are advised to read note 07.1 of latest financialstatements

FIGF Vs Benchmark

Investment ObjectiveFaysal Asset Allocation Fund (FAAF) endeavors to provide investors with anopportunity to earn long-term capital appreciation optimizing through broadmix of asset classes encompassing equity, fixed income & money marketinstruments

Fund

Info

rmat

ion

Fund Type Open EndedCategory Asset Allocation SchemeRisk Profile Moderate to High RiskLaunch Date 24th July 2006Custodian/Trustee CDC

AuditorErnst & Young Ford Rhodes Sidat Hyder

Management Fee 2%Front/Back end Load 3.0% (Front end Load)Min Subscription PKR 5,000Benchmark* KSE100 Index / 6M KIBORPricing Mechanism ForwardDealing Days Monday-FridayCut-Off Timing 9am-5pmAMC Rating AM3+ (JCRVIS)NAV per Unit (PKR) 65.95Net Assets (mn) 297.08Leverage Nil* weighted average of 6M KIBOR & percentage invested in equities

Jun' 12 May' 12

Fund

R

etur

ns FY12 to Date -0.02 6.19

Month-on-Month -5.84 0.44


Top

10 H

oldi

ngs

(% o

f T. A

sset

s)TPL Trakker Limited 9.95Millat Tractors 9.94Pakistan State Oil 4.70Nishat Mills Limited 4.58Japan Power Generation Limited 4.10Engro Corporation Pakistan 3.38Lafarge Pakistan Cement 2.44Sui Northern Gas Pipelines Co. Ltd 1.68Fatima Fertilizer Company Limited 1.60Lotte Pakistan PTA 1.3

Ass

et Q

ualit

y (a

s %

of T

otal

A

sset

s) AA+ 8.30

AA 27.71

AA- 7.32

BBB- 4.11

Inve

stm

entC

omm





Vasseh Ahmed Senior Portfolio ManagerImran Altaf (Fixed Income) Acting Fund Manager


Non Compliance `

Name of InstrumentRating

requiredExisting Rating

Type of Instrument

Value of Investment before provisioning

Provision (If any)

Value of Investment after provision

% of Net Assets

% of Total Assets

Maple Leaf Cement BBB D TFC 28,074,124 28,074,124 - - ‐

Trust investment Bank BBB B TFC 12,380,885 - 12,380,885 4.17 4.11

Ris

k-qu

ants

Alpha -0.0572%Beta 1.0222Standard Deviation 0.5777%VaR 0.9502%Treynor -0.1168


Performance ReviewAlthough your fund ended the year with a net YTD return of 5.05% on account of healthy activity on the equity bourse over 2HFY12,provisioning taken for a small portion of non-performing assets, however, trimmed down the final net return to -0.02%. The measure takenat the end of the outgoing fiscal year will ensure that the fund remains clear of the adverse impact of non-performing assets over theupcoming year (i.e. FY13).After successfully navigating the lackluster month of May by reducing equity exposure, fund management increased the same from 31% to47% in June to capitalize on expectations that the US and Pakistan are close to sealing the NATO route deal. For the upcoming year, yourfund remains poised to capitalize on fundamentally strong and lucrative opportunities within the domestic capital market.

Jun’12 May’12

Jun' 12 May' 12

Top

5 S

ecto

r A

lloca

tions

(% o

f T.

Ass

ets)

Technology Hardware and Equipment 9.95 -Industrial Engineering 9.94 8.19Chemical 8.16 4.05Oil and Gas 5.85 5.78Personal Goods 4.58 4.49


Performance ReviewAfter a laggard 1HFY12, the fund witnessed a sharp pull-back as performance improved on the back of healthy activity within the capitalmarket. That said, the management decided to provide completely for non-performing assets during June to eliminate any future possibilityof provisioning. Resultantly, the fund has ended the year with a YTD return of -4.69% in June. Going forward, the fund aims to strike anoptimal mix of fixed-income and equity securities to capitalize on equity-induced opportunities and protect against excess interest rate risk.

Fund

Info

rmat

ion

Fund Type Open EndedCategory Balanced SchemeRisk Profile ModerateLaunch Date 19 April 2004Custodian/Trustee CDCAuditor Ernst & Young Ford Rhodes Sidat HyderManagement Fee 2%Front/Back end Load 2.25% (Front end Load)Min Subscription PKR 5,000Benchmark* KSE100 Index / 6M KIBORPricing Mechanism ForwardDealing Days Monday-FridayCut-Off Timing 9am-5pmAMC Rating AM3+ (JCRVIS)NAV per Unit (PKR) 59.78Net Assets (mn) 210.02Leverage Nil

* weighted average of 6M KIBOR & percentage invested in equities

Jun' 12 May' 12

Fund

R

etur

ns

FY12 to Date -4.69 2.77Month-on Month -7.26 -2.79Since Inception 63.42 76.21Benchmark (YTD) 11.59 11.44

Top

10 h

oldi

ngs

(% o

f T. A

sset

s)

Pak Elektron Ltd- Pref Shares 17.36

Millat Tractors 10.10

TPL Trakker Limited 9.25

Pakistan State Oil 4.91

Nishat Mills Limited 4.19

Kot Addu Power Company Limited 3.03

Sui Northern Gas Pipelines Co. Ltd 2.23

Fatima Fertilizer Company Limited 2.06

Fauji Fertilizer Company Limited 1.90

Lafarge Pakistan Cement 1.90

Asse

t Qua

lity

(as

% o

f Tot

alAs

sets

) AA+ 9.26

AA 12.11

AA- 0.02

Inve

stm

ent C

omm








Non Compliance

Name of InstrumentRating

requiredExisting Rating

Type of Instrument

Value of Investment before provisioning

Provision (If any)

Value of Investment after provision

% of Net Assets

% of Total Assets

Telecard A- D TFC 36,728,580 36,728,580 - - -

Pak Electron LimitedA- D Preference

Shares 37,490,000 - 37,490,000 17.85 17.36


Ris

k-qu

ants Alpha -0.0646%

Beta 0.9113

Standard Deviation 0.6120%

VaR 1.0066%

Treynor -0.1823

Investment ObjectiveFaysal Balanced Growth Fund (FBGF) endeavors to provide investors with anopportunity to earn income and long-term capital appreciation by investing in alarge pool of funds representing equity / non equity investments in a broadrange of sectors and financial instruments

*SECP had granted extension to regularize this exposure till 30 September 2012.

Jun' 12 May' 12

Top

5 Se

ctor

Al

loca

tions

(% o

f T. A

sset

s)

Households 17.36 20.15Industrial Engineering 10.10 9.45Technology Hardware and Equipment 9.25 -Chemicals 8.11 4.84Oil & Gas 4.91 4.76

Jun’12 May’12


Sor

tino

Rat

io The Sortino ratio measures the risk-adjusted returnof an investment asset. It is a modification of theSharpe ratio but penalizes only those returns fallingbelow a user-specified target, or required rate ofreturn, while the Sharpe ratio penalizes both upsideand downside volatility equally.

Tryn

orR

atio

Treynor ratio is a measurement of the returnsearned in excess of that which could have beenearned on a riskless investment (i.e. Treasury Bill)(per each unit of market risk assumed).Treynor ratio (sometimes called reward-to-volatilityratio) relates excess return over the risk free rate tothe additional risk taken; however systematic riskinstead of total risk is used. The higher the Treynorratio, the better the performance under analysis.

Alp

ha (α

) How much excess returns fabricate by an instrumentor portfolio over the benchmark. A positive alpha isthe extra return awarded to the investor for takingadditional risk rather than accepting the marketreturn.

Bet

a (β

)

A measure of the volatility, or systematic risk, of asecurity or a portfolio in comparison to the market asa whole. A beta of 1 indicates that the security'sprice will move with the market. A beta of less than 1means that the security will be less volatile than themarket and vice versa.

Info

rmat

ion

Rat

io A ratio of portfolio returns above the returns of abenchmark (usually an index) to the volatility ofthose returns. This ratio will identify if a manager hasbeaten the benchmark by a lot in a few months or alittle every month. The higher the IR the moreconsistent a manager is.

Sta

ndar

d de

viat

ion It shows how much variation exists from the average

(mean, or expected value). A low standard deviationindicates that the data points tend to be very close tothe mean and vice versa.

Val

ue a

t Ris

k (V

aR)

VaR refers to the particular amount of money, themaximum amount we are likely to loss over someperiod, at some specific confidence level.For example if a portfolio of stocks has a VaR of 2%at the confidence level of 95% of Rs. 1 million, thereis 5% probability that portfolio loss could exceed Rs.20,000 in a day.

Disclaimer:This publication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any fund. All investments inmutual funds are subject to market risks. The NAV based prices of units and any dividends/returns thereon are dependant on forces and factors affecting the capital markets. These maygo up or down based on market conditions. Past performance is not necessarily indicative of future results

FUND MANAGER’S REPORT Jun · FUND MANAGER’S REPORT Jun‘12 For the fiscal year 2011-12 policy...

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Transcript of FUND MANAGER’S REPORT Jun · FUND MANAGER’S REPORT Jun‘12 For the fiscal year 2011-12 policy...