ISLAMABAD: The government has allowed money market schemes to invest in government debt securities, traded through the Pakistan Stock Exchange (PSX), to ensure maximum participation of mutual funds in Sukuks/govern-ment securities.
The Securities and Exchange Commission of Pakistan (SECP) has issued a direction number 7 of 2023 on the Categorization of Open-End Collective Investment Schemes (CIS).
The SECP has issued directions to the Chief Executive Officers of Asset Management Companies; Mutual Funds Association of Pakistan and Trustees of Collective Investment Schemes. According to the SECP directive, in order to enhance and promote the capital markets and ensure wider participation of mutual funds in one year Government Debt Securities (Sukuks/govern-ment securities) to be raised and traded through Pakistan Stock Exchange, the Commission, hereby, allows the money market schemes to invest in government debt securities, with a maturity exceeding six months and up to one year for a period of 12 months from the date of this direction unless extended, SECP said.
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This is subject to the following conditions:
(i) The requirement for weighted average time to maturity of the net assets including government securities shall remain as “not exceed 90 days”.
(ii) The respective monthly fund manager report shall include the disclosure of the actual exposure in the referred Government Debt Securities with a maturity exceeding six months and up to one year, calculated as a percentage of Net Assets.
(iii) All the other conditions applicable to money market schemes including the risk profile through the prevalent Regulations, Circulars and Directions shall remain intact.
The respective “Money Market Schemes” shall incorporate enabling provisions/distinctive disclosure in the relevant offering documents as required under Regulation 44(9) of the Regulations, SECP added.
It is worth mentioning that the money market fund invests in short-term fixed-income securities, for example, government bonds, certificates of deposits and commercial paper. The aim of a money market fund is to maintain high liquidity by investing in low-risk short-term instruments, and is generally a safer investment. Returns generated by a money market fund are likely to fluctuate much less versus other types of mutual funds. Money market funds are ideal for new investors as they are the least complicated to follow and understand.
Copyright Business Recorder, 2023
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