KARACHI: Assets managed by the mutual funds industry consisting of 20-odd companies crossed the one-trillion-rupee mark for the first time at the end of 2020-21, according to data released by the Mutual Funds Association of Pakistan (MUFAP) on Thursday.

Their assets under management or AUM have grown at an annualised rate of 15.7 per cent over the last 10 years, tweeted Arif Habib Ltd. Total AUM amounted to Rs1.02tr at the end of June, up 64.3pc from a year ago.

Analysts believe one of the major reasons for the sudden surge in AUM of mutual funds was the government’s decision to stop cash-rich institutional investors like insurance companies from investing in National Savings Schemes at the beginning of 2020-21.

As a result, there was a net outflow of Rs193.4bn from the Central Directorate of National Savings (CDNS) in the first 11 months of 2020-21. According to the apex regulator of the financial sector, the asset management segment became an attractive alternative for institutional investors partly because of that regulatory change.

The largest chunk of AUM is concentrated in money market funds that invest in debt instruments with a term-to-maturity of less than one year in most cases. About 28pc of AUM amounting to Rs285.2 billion were invested in money market funds at the end of June 2021.

Although the benchmark index shed 540 points or 1.1pc on a monthly basis in June, asset management companies were able to mobilise net sales of Rs40.3bn in the same month.

Speaking to Dawn, Arif Habib Ltd CEO Shahid Ali Habib said the consistent rise in AUM over the years shows asset managers have successfully reached out to retail investors to generate additional funds. “The growth rate in AUM is going to go further up in the coming years. The penetration level of our asset management industry is still very low compared with other regional economies,” said Mr Habib, adding that participants in the mutual funds industry have been absorbing foreign selling for the last four years.

As per the unit-holder pattern published by MUFAP, individuals enjoy a 33pc share followed by retirement funds (12pc), banking and financial institutions (7pc), provident funds (6pc), pension funds (4pc), gratuity funds (2pc) and “Others” (48pc).

About one-quarter of AUM are invested in the share market while the rest are deployed in fixed income funds, MUFAP’s asset allocation breakdown shows.

Asset managers originated almost 79pc of their net sales in June through direct sales as opposed to the banking channel that helped mutual funds mobilise net sales of only Rs644 million.

AUM of pension funds amounted to Rs38.1bn at the end of June, up 29.6pc from a year ago. Similarly, AUM of exchange-traded funds totalled Rs144m at the end of 2020-21, which was 65.5pc higher than the year-ago figure.

Published in Dawn, August 13th, 2021