Mutual fund trend

With the gradual shift in investment preferences, asset management companies seem to be actively treating investors with the evolution of capital/principal preservation funds. So far in 2014, a good number of eight principal preservation funds have been launched, while two more funds namely Meezan Capital Preservation Plan (MCPP-I) and Alfalah GHP Capital Preservation Fund are in the offing.
Not to disregard, these contemporary schemes have been well-received by the investor community, which has prompted the asset management companies to jump on the bandwagon. On aggregate basis, this year saw the launch of 14 new funds under various categories.
Thanks to the overwhelming response received, these new funds were able to fetch fresh funds worth Rs15 billion, thus taking the total industry size to Rs383 billion. It is interesting to note that capital/principal preservation funds framed nearly 82 percent of the fresh investments in 2014, which is a clear manifestation of investors’ rising inclination towards preservation of capital.
Recall that not long ago, investors were gung-ho about investing in money market funds as returns on such funds are steady and considered to be safe like bank deposits. Now, preservation funds have become the talk of the town. But, at this stage, only a selected number of asset management companies namely, ABL AMC, UBL Fund Managers, NAFA, AlMeezan and Alfalah GHP have lined up out of the total 23 asset management companies operating in our mutual fund industry. With the remaining ones rolling out, one can expect the industry to enter the expansionary phase and rise in terms of value.
Investors’ soaring inclination is associated with the added suppleness of principal preservation funds operated under the Constant Proportion Portfolio Insurance (CPPI) methodology, which allows fund managers to dynamically alter the portfolio mix between equity and fixed income which protecting the initial investment, thus yielding balanced returns by capturing the equity gains.
That said it’s a good omen for asset management companies to introduce such funds to cater to the rising investment preservation needs. Not to disregard, active fund management remains crucial, and in this era of rising competition between distributors of mutual funds, it will be intriguing to see how fund managers are able to take the lead.

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Capital/Principal Preservation Funds Launched in 2014

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Fund Name                                                 Launch date  AUM (Rs in mn)

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ABL Islamic Principal Preservation Fund                     24-Dec-13            1033

ABL Islamic Principal Preservation Fund II                  31-Mar-14            1018

Meezan Capital Preservation Fund II                         28-Jun-14            2028

Meezan Capital Preservation Fund III                        31-Jan-14            3021

Al Ameen Islamic Principal Preservation Fund I              27-Apr-13             897

Al Ameen Islamic Principal Preservation Fund II            .07-Nov-13            1041

Al Ameen Islamic Principal Preservation Fund III            20-Jun-14            2154

Al-Ameen Islamic Principal Preservation Fund IV (AIPPF-IV)             To be launched

Alfalah GHP Capital Preservation Fund                                  To be launched

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