Keeping up with its tradition, National Investment Trust Limited announced phenomenal payouts for all the funds under its management for the year ended June 2011, and if the stumbling blocks in the way of NI(U)Ts path to progress are removed, investors could be in for a treat next year as well.
NI(U)T - NITs flagship fund - has been underperforming the market since the last two years; though for unit holders it must be heartening to note that this years underperformance was only marginal: 3.5 percent.
The fund has been in trouble on account of the heavy selling by banks holding the LOC version of the same fund. As a result, "the NAVs of NI(U)T has been depressed of late," says Manzoor Ahmed, NITs Chief Operating Officer.
However, Manzoor adds that with most of LOC selling now completed by the banks, NI(U)T will likely start outperforming the index beginning FY12, as it has been doing in the years before the LOC was split and banks started selling the stock.
But aside from that there is another factor that may keep the NI(U)Ts NAV depressed. And that is the propping up of the share prices of Oil and Gas Development Company Limited. OGDCLs shares have been propped up quite high on account of foreign buying, which has kept KSE-100 on the upside, given the skewed nature of the index in favour of OGDC.
NI(U)T on the other hand, has been a seller in OGDC because the funds managers, as Manzoor opined, think of OGDC as an overpriced stock.
Market sources reveal that foreign investors have cornered the stock, hoping that the local mutual funds would come buying the stock eventually, when their NAVs start reflecting an underperformance. But, looking at nerves of local funds - including that of NIT - it appears foreign investors might have to wait longer than they expected.
Aside from maintaining a positive outlook on NI(U)T, the firm is also optimistic about the performance of its income and government bond funds. "We have increased the duration of the portfolio, where we are asking managers to go long on 6 and 12 month papers than on 3 month papers," says Manzoor, adding that interest rates seems to have peaked.
The state-run asset management company, which "almost doubled" its gross sales in FY11 is also looking to expand its operations to rake in extra money into its funds. "We have recently expanded our branch network in Karachi and Lahore, and we are looking to open one more branch in each of the two cities".
In addition, the firm is exploring expansion potential in select districts of interior Sindh, as well as in southern Punjab, and other upcountry areas. At the same time, it is planning to step on its ATM-based redemption facilities that are currently in the works in a joint service venture due to be launched with Summit Bank. Once the service is rolled-out, similar facilities will be provided through other banks as well.
Indeed, it is this kind of proactive management attitude that makes NIT stand out from the rest of the ailing elephant like state-run enterprises.
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