Mutual Funds: Performance in January

With the stock market dipping over four percent in January, equity fund managers did not have a lot of room to work. Foreign selling continued amidst global growth concerns, putting pressure on the local bourse despite strong fundamentals and discounted valuations.

After three consecutive months of being net purchasers, mutual funds sold Rs. 1.86 billion worth of shares (net) in January. Returns for conventional equity funds averaged -2.45 percent (loss) for the month,

outperforming the benchmark index. According to data compiled by MUFAP, the only fund not producing a loss in January was JS Value Fund. Among Shariah compliant equity funds (averaging a 1.61 percent loss), JS Islamic Fund was the top performer with 0.56 percent return.

Going forward, however, the riskier equity funds are expected to give better gains - unlike the past twelve

months. Market pundits believe the improving macro indicators and triggers like PSXs reentry into MSCI EM index can take the benchmark index to around 38,500 points by the close of CY16.

In the non-equity universe, aggressive fixed income funds did well. Investing in a combination of government securities, fixed income debt securities, reverse REPOs and commercial papers, among other instruments,

these funds produced average (annualized) returns of 9.75 percent. Expectedly, there was high deviation in payouts among aggressive fixed income funds, with returns ranging from seven percent up to 19 percent (AKD Aggressive Income Fund).

Least volatile options - money market and income funds - saw (annualized) returns of 5.51 percent and 7.57 percent respectively. Their Shariah compliant version offered considerably lower gains, signaling towards lack of options in this domain.