Islamic Mutual Fun Industry In Pakistan

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ISLAMIC MUTUAL FUND INDUSTRY IN PAKISTANWajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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GROUP MEMBERSWajid Ali3335Haifa Saleem3336Nabita Ishtiaq3353Shakeel Aslam3338Hassan Naseer3328Rana Tassaduq3316 PRESENTED TO:Dr. Salman AhmadWajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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Presented by:

Wajid Ali MBA-E9-3335Wajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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INTRODUCTIONA mutual fund is an investment vehicle that pools in the monies of several investors, and collectively invests this amount in either the equity market or the debt market, or both, depending upon the funds objective.

This means you can access either the equity or the debt market, or both, without investing directly in equity or debt.Wajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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CONCEPT OF A MUTUAL FUNDA Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.

The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them.Wajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com5

How Mutual Fund works?Pool their money withINVESTORSFUND MANAGERSPassed back toGenerateSECURITIESInvest inRETURNSWajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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Mutual FundsMutual FundsProfessional Fund ManagersMBAsCAsCFAs

The InvestorInvestmentsStocks Money MarketsTFCs Bank Deposits CFS

Wajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com7

Income is earned from dividends on stocks and interest on bonds.

If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Continue..Wajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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First modern day mutual fund was opened in North America in 1924.

The GREAT DEPRESSION of 1930s in USA has stalled the growth of mutual funds sector, like many other economic activities.

Yet it was, 1990s that mutual funds became mainstream investments in the USA and around the globe.

At the end of June 2013, total mutual fund assets all over the world were USD 30.05 trillion.History and Inception of Mutual FundsWorldwide Mutual Fund IndustryWajid AliMBA 6th SemesterFB: wajid.ali26@yahoo.com

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Presented by:

Haifa Saleem MBA-E9-333610

Islamic Mutual Fund IndustryThe Islamic mutual funds market is one of the fastest growing sectors within the Islamic Financial System.

Yet when compared to the mutual fund industry at large, Islamic mutual funds are still in their infancy stage of growth and development.

The wider acceptance of equity funds by Shariah Scholars in early 1990s paved the way to launch Islamic mutual funds.

Currently there are over 600 Islamic Institutions in some 75 countries that are managing funds worth over USD 1.5 trillion by the end of June 2013.11

Comparison of Islamic VS World Wide Mutual Fund Industry4.99%$ 1.5 trillion

$ 30.05 trillionGraph Prepaid By : Wajid Ali

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TYPES OF MUTUAL FUNDS ON THE BASES OF STRUCTUREOpen End:-Continuously offer and redeem their units to the investors.

Closed End:-One time issuance of certificates and then are traded in the secondary market. 13

Open Ended FundsA type of mutual fund, where there are no restrictions on the amount of shares the fund will issue.

If demand is high enough, the fund will continue to issue shares no matter how many investors there are.

Open-end funds also buy back shares when investors wish to sell.

It's important to understand that each mutual fund has different risks and rewards.

In general, the higher the potential return, the higher the risk of loss.

Although some funds are less risky than others, all funds have some level of risk - it's never possible to diversify away all the risk. This is a fact for all investments.

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Closed End FundsClosed End Funds have a predetermined and fixed number of shares outstanding.

Closed-end funds behave more like stocks because they trade on an exchange and the price is determined by market demand after an initial public offering (IPO) process.

Closed-end funds can be traded below their net asset value or above.

The closed-end fund "company" still has its own stock, which is traded on an exchange and trades above or below its underlying value, or net asset value (NAV), in this case.

They also trade according to market demands. Every seller must have a buyer.

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TYPES BY INVESTMENT OBJECTIVEGROWTH / EQUITY ORIENTED SCHEMES

EQUITY FUNDS

INDEX FUNDSSECTOR FUNDS

INCOME / DEBT ORIENTED SCHEME

SPECIALIZED FUNDS

ISLAMIC FUNDSBALANCED FUNDLIQUID FUNDSBOND FUNDS

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Presented by:

Nabita Ishtiaq MBA-E9-335317

Benefits OF Mutual FundsProfessional Management:-Expertise to manage and reinvest interest or dividend income, or to investigate thousands of securities. Access to extensive research, market information, and skilled securities traders.

Liquidity:-Mutual fund can be bought and sold on any business day, so investors have easy access to their money. Many individual securities can also be bought and sold readily, others aren't widely traded.18

Diversification:-Securities from hundreds or even thousands of issuers it reduces the risk of loss.

Convenience:-Mutual funds offer services that make investing easier. Mail, telephone, or the Internet. Automatic investments into a fund or automatic transfers from a fund to your bank account.

Tax Free Return:-The stock dividend from mutual funds are exempt from tax. Cash dividend taxable.

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Comparison of Income Funds with Bank DepositsTAX BENEFITS OF MUTUAL FUNDS0%1.2%Tax Deduction0%4.2%Tax DeductionBank DepositsMutual Funds*Corporate (35% Tax Bracket)Pre tax return12.0%12%After tax return7.8%12%Individuals (10% Tax Bracket)Pre tax return12.0%12%After tax return10.8%12%20

MARKET RISK: Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this.

Inflation Risk: Inflation is the loss of purchasing power over time.

INTEREST RATE RISK: In a free market economy interest rates are difficult if not impossible to predict.

POLITICAL/GOVERNMENT POLICY RISK: Changes in government policy and political decision can change the investment environment.

LIQUIDITY RISK: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. 1RISK FACTORS OF MUTUAL FUNDS21

History of mutual funds in Pakistan

Mutual funds in Pakistan are registered and legally established in the form of a Trust, under the Trust Act of 1882.

The mutual fund industry is regulated by, the Securities and Exchange Commission of Pakistan (SECP) which licenses each Asset Management Company in strict compliance with the NBFC Rules, 2003 and requires all AMCs to obtain an independent rating.

Mutual funds introduce in Pakistan in 1962, with the public offering of National Investment Trust followed by the establishment of the Investment Corporation of Pakistan (ICP) in 1966.

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Rules Govern Mutual Funds in PakistanThere are two rules govern mutual funds in Pakistan, which are:

Investment Companies and Investment Advisors' Rules, 1971. (Govern closed-end mutual funds)

2. Asset Management Companies Rules, 1995. (Govern open-ended mutual funds)

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Comparison of Pakistans VS World Wide Islamic Mutual Funds 2.66 %$ 0.04 trillion

$ 1.50 trillionGraph Prepaid By : Wajid Ali24

Presented by:

Shakeel Aslam MBA-E9-333825

As the year 2013 draws to a close, the mutual fund industry appears to be undergoing a consolidation phase. The number of asset management companies has gone down from 27 in 2012 to 24 by now.

In the year-ended June 30, there were about 175,000 individual investor accounts (not to be confused with number of individual investors), against about 171,000 in the prior year.

This seems to be the logical next step in the evolution of this industry, which is still in a developing stage, with less than Rs. 400 billion in total assets under management.Continue..26

Why Mutual Funds lagging in Pakistan? Controlled by Public Sector, initially

Lack of awareness

Interest rates were too high

Education

Distribution

Low savings

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Mutual fund and PakistanMUFAP (mutual fund association of Pakistan) is the trade body for Pakistan's multi billion rupees asset management industry.

MUFAP role is to ensure transparency, high ethical conduct and growth of the mutual fund industry.

After the establishment of MUFAP in 1996, private and foreign firms were allowed to float open-ended funds for the general public.

. Mutual Funds were initially overseen by the Corporate Law Authority (CLA) under its Securities Wing.

The money that members manage is in a wide variety of investment vehicles including stocks, bonds, money market instruments, government securities and bank deposits.28

Continue..The CLA, then a division of the Ministry of Finance, was