Asset management in Pakistan is on the cusp of transformation, driven not just by growing investor awareness but also by technological and regulatory upgrades like the shift to a T+1 settlement system. The system is slated to be operational starting today, Feb 9.

By reducing the time between trade execution and fund availability from two days to just one, this system allows asset management companies to deploy capital faster, manage liquidity more efficiently, and respond swiftly to market opportunities.

For investors, the switch translates into quicker redemptions, faster portfolio adjustments, and greater confidence in the transparency and agility of fund operations. In essence, T+1 is not merely a technical change — it is a catalyst for a more dynamic, efficient, and competitive asset management ecosystem.

Pakistan’s economy continues to be constrained by a chronically deficient savings rate, which has solidified into a structural weakness. Official data confirms that the gross domestic savings rate stood at a mere 7.1 per cent of GDP in June 2025; a figure that has shown little meaningful variation over recent years. This stagnation reflects a deep-seated trend, with the broader domestic savings rate having remained trapped within the 12–15pc band for nearly two decades.

Structurally, the industry remains weighted towards low‑risk, fixed‑income products, though a gradual shift to equity exposure is underway

This shortfall in domestic savings has direct and severe consequences for macroeconomic stability. With an investment rate significantly higher than the savings rate, Pakistan is forced to rely on substantial external inflows to finance its development, leading to chronic dependence on foreign borrowing.

As evidenced by a sharp increase in external loans, this dependency exacerbates the country’s recurrent balance-of-payments strains, leaving the economy vulnerable to external shocks and complicating long-term fiscal planning.

Pakistan’s economic trajectory is also severely hampered by a critically low and declining rate of investment. The investment-to-GDP ratio has stagnated, registering at just 13.8pc in FY25 against a target of 14.2pc.

This chronic investment shortfall is both a cause and a consequence of the economy’s structural weaknesses. It is intrinsically linked to the nation’s low domestic savings, which fail to provide sufficient capital for growth, forcing a reliance on external borrowing.

Against this backdrop, the asset management industry — led by mutual funds and professionally managed investment products — has emerged as a vital channel for mobilising savings and deepening financial markets. Once marginal, the sector’s assets under management (AUM) have expanded sharply in recent years, reflecting nascent shifts in investor behaviour, rising market participation and greater financial sophistication.

Official data from the Securities and Exchange Commission of Pakistan (SECP) confirms that total AUMs have grown almost sevenfold, soaring from approximately Rs578bn in 2019 to about Rs3.93 trillion by June 2025.

This expansion has been notably led by Shariah-compliant products, whose share of the total asset pool increased from 39pc to 44pc over the same period. This sustained, long-term growth underscores a meaningful move by investors — both retail and institutional — toward professionally managed funds, primarily driven by the stagnating and often negative real returns offered by traditional bank savings instruments.

The growth trajectory, however, has not been linear and recently encountered a temporary reversal. After peaking at over Rs4.43tr in December 2024, mutual fund deposits fell by more than half a trillion rupees to Rs3.93tr in June 2025 — a roughly 10pc drop.

However, this contraction was not a market failure but a direct result of temporary regulatory arbitrage; banks moved substantial deposits into money market funds to meet year-end regulatory requirements before withdrawing them shortly afterwards.

Consequently, this short-term volatility highlights the sector’s ongoing sensitivity to policy shifts, even as the underlying, multi-year trend points to a profound and enduring change in how Pakistan’s savings are being channelled into the capital markets.

Pakistan’s mutual fund sector is witnessing a notable shift in its investor base, marked by steadily rising retail participation. This broadening base of public investment activity beyond corporate and institutional flows is a well-recognised and critical market trend. This expansion of the domestic investor pool has provided essential stability, helping the equity market absorb periods of foreign outflows and representing a key structural development for the country’s capital markets.

Furthermore, asset management companies are also facilitating a meaningful transition in how Pakistani savings are channelled, moving from traditional instruments toward professionally managed funds and contributing to a more robust and resilient financial ecosystem.

Structurally, the industry remains weighted towards lowerrisk, fixedincome-oriented products, with money market and income funds dominating the asset mix. Nevertheless, there has been a gradual reallocation towards equity exposure, especially over the past three years, with equity allocations rising as markets rallied — the KSE100 Index delivered strong cumulative returns during this period.

Despite the industry’s growth, Pakistan’s mutual fund penetration remains modest relative to economic size and compared with regional peers. The proportion of total savings channelled into organised asset management is still small, highlighting large, untapped potential.

Looking forward, the industry’s future will be shaped by several factors: macroeconomic stability, improvements in financial literacy, continued product innovation, and policy and technology support to broaden market access for ordinary investors. Strengthening digital distribution, reducing entry barriers into equity investments, and fostering longterm savings vehicles are among measures that could deepen the sector’s reach.

Published in Dawn, The Business and Finance Weekly, February 9th, 2026