Mutual fund industry posts phenomenal growth but struggles to diversify products and channels.
During the past few years Mutual Fund Industry has witnessed significant growth. It expanded from Rs 24 billion at the time of establishment of MUFAP in 2001 to Rs490 billion in total assets under management as of June 2016. It is significant to be noted that the industry still is behind in terms of expansion of distribution networks and expansion in products' range. Despite its very high growth, the mutual fund assets represent less than 5 percent of the total banking deposits. In developed countries, the size of mutual funds exceeds banking deposits. Similarly, assets under management as a percentage of GDP are under 2 percent in Pakistan.
There is still need to do more in terms of further expanding the Mutual Fund industry. Compared to other parts of the world, the level of awareness of mutual funds in Pakistan is very low. Though the Mutual Fund industry has rapidly grown very much high over the past few years, the large part of the assets under management come from corporate investors.
The awareness at the retail level and specifically the small 'grass-root' level is still very low. The total volume of mutual fund industry depicts that the retail base of mutual fund industry is growing at a very slow speed space. This may be attributed to low level of efforts being made for awareness by either individual asset management companies or by their representative forum.
People must realize that investing in mutual funds is a good way for them to meet their financial goals and not just a means of short-term financial gain. With the present situation, the investors may apprehend investments in the capital markets to be high-risk, and delay to transmit their savings towards mutual funds.
It is the obligation of the mutual fund industry to recognize this issue and stimulate the confidence in the minds of investors by reaching out to them and creating awareness about mutual funds as financial products and removing the confusions and beliefs associated with mutual funds as a new way of saving.
The demand today is to take the industry to progress and to go into the small retail investors instead of completely concentrating on institutional clients who make large investments in the funds with lesser efforts on asset management companies' (AMC) part.
The mutual fund industry must know that large number of retail investors not only result in increased assets under management but also enhance the stability of the funds and the industry in general, finally leading to deduction in the systemic risk. It is essential that all AMCs come together and work towards creating awareness about mutual funds and their benefits for the investors.
Mutual funds offer a great investment opportunity for individual investors and have a lot of potential in the Pakistani market. The industry must focus to deliver best performance, introduce new products and give priority to the interests of the investor before its own.
All the AMCs must consider expanding their networks physically to gain access to retail investors. It is essential for the AMCs to expand its outreach across the country and increase retail penetration within the sector. It must make it mandatory for the AMCs to establish its own branch network across Pakistan.
With innovative developments in the capital market, global integration and evolving regulatory environment, it is compulsory that Mutual industry keep pace with these changes by preparing ourselves for future challenges.
Securities and Exchange Commission of Pakistan (SECP) during the year has introduced a more favourable regulatory regime to facilitate sustained growth of the fund management industry in Pakistan. In alliance with the MUFAP and other industry stakeholders, the SECP has taken a number of extra initiatives, which are aimed at increasing the mutual funds industry and safeguarding investor interests. These actions include ban on management fee sharing with investors by the AMCs, ban on charging of sales load to investors who directly approach AMCs or make online investment using the website of AMCs.
Moreover with a view to encourage AMCs to increase retail participation in funds, SECP has allowed reduction in SECP annual fee for mutual funds that have at least 1,000 retail investors and more than 50 percent of its net assets are held by individual investors. As an effort towards increasing retail penetration SECP is considering to take measures for promoting independent distributors network with minimum equity and regulatory requirements.
On the basis of information provided as transparently as possible through offering documents and other reports, that investors place their savings with mutual funds.
It is therefore necessary that the industry develop the social behavior of sharing information not just to comply with regulatory requirements but also to enhance the level of transparency and credibility. The collaboration of all industry stakeholders is essential to achieve this objective and the SECP is committed to provide every possible support in this regard.
The SECP will work closely with the MUFAP to ensure a fair, transparent and efficient mutual funds and pension funds industry which efficiently mobilizes and stir the savings and investments of households and public at large.
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|Publication:||Pakistan & Gulf Economist|
|Date:||Aug 27, 2017|
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