KARACHI (October 10 2006): Pakistan's asset management industry has blossomed in the last few years, providing investors many ways to diversify their current investment portfolios and seek higher returns.

Pakistan, as compared to other emerging and non-emerging economies, ranks among the lowest with regard to investment in mutual funds instead of much potential and high return rates.

Analysts at the mutual fund industry said that in Pakistan, the investment ratio as percentage of bank deposits currently stands at a mere 5 percent as compared to India's 20 percent and developed economies at 90 percent plus level. There are currently 28 asset management companies to choose from, which offer both open and closed end schemes.

Equity funds pose a different scenario, as the returns are volatile. In this case, it is needed to look at how the KSE 100 Index performed during the period of performance in question, as that is the benchmark of performance for investors in the stock market.

According to a research report, AKD Opportunity Fund has topped the list in the open end (Equity) category with an approximate return of 8.93 percent during the period from July 1 to September 30, 2006, followed by NIT, which has also appreciated by 8.58 percent. These two funds have actually provided the best return among all asset classes. AKD Opportunity Fund's return of 8.9 percent beats the KSE 100 index's performance for the same period, which was 5.2 percent, followed by an impressive return of 8.6 percent by NIT. UTP A30+ Fund came in third with a return of 7.53 percent, interestingly this is an index fund.

As for as the closed end category is concerned the Golden Arrow Selected Stock Fund has outperformed the competition by providing a return of 6.6 percent in the first quarter of FY 2007. In second place is the AKD Index Tracker Fund, giving a return of 5.4 percent.

The top two performers in closed end funds (Golden Arrow Selected Stock Fund Limited and AKD Index Tracker Fund) and the top performing open-end fund (AKD Opportunity Fund) happen to be managed by AKD Investment Management Limited.

Interestingly, out of the 20 equity funds reviewed during this period, only 6 funds in fact outperformed the KSE-100 and two of them are index funds, hence, proving the point that very few Fund Managers successfully manage to consistently beat the performance of the KSE 100 Benchmark Index.

In order to understand how this impressive return was achieved by AKD Investment Management, the Chief Executive Officer of AKDIML, Faisal Bengali, stated: "We have outperformed the KSE 100 index and our competition due to our strict investment discipline. We conduct deep fundamental analysis of sectors and stocks and conduct a regional comparative study to ensure we invest in undervalued, high quality stocks, showing growth potential. Our execution is assisted by our technical analysis of the market and key financial ratios."

On the fixed income side, this quarter of the 8 income funds it is observed that essentially the returns of fixed income funds do not really differ from one another, ie the best performing fixed income fund for the period was Atlas Income Fund with an appreciation of approximately 2.96 percent, followed by Askari Income Fund at 2.95 percent.

Looking at the range of NAV appreciation in this category it is seen that it starts from around 2.50 percent to 2.96 percent, thus also proving that the fixed income market still does not have much depth, an illiquid secondary market and limited investment options have resulted in most fixed income funds being managed more or less the same and the returns are at best 150-200 bps above 6-month KIBOR.

The performance of top five open-end income funds is: Atlas Income Fund 2.96 percent; Askari Income Fund Class B 2.95 percent; Faysal Income and Growth Fund 2.93 percent; AMZ Plus Income Fund 2.77 percent; and UTP Income Fund 2.55 percent.

Copyright Business Recorder, 2006