Professional management of investments comes under fire every time the markets crash. The crisis of 2008 was no different, many investors lost savings. Business development teams at asset managers, glorified results based on performance matrix from boom times.
Since then, investors have become risk averse. And that is evident in the migration in the mutual fund industry towards relatively safer money market funds. Assets under management have shot up to almost Rs25 billion from Rs4 billion in June 2009, in this category.
On the horizon is a new asset allocation fund, by BMA Funds. In its offering documents, BMA Funds boasts a significantly higher return on equity exposure compared to other managers, at a time when equity markets gained 59 percent.
Asset allocation funds allow fund managers to actively manage the investments, in order to lock in the best opportunities for their clients. Typically, investments are made across asset classes to maximize return while hedging downside risks. In Pakistan, equity investments generally attract nearly 50 percent, while cash and fixed income assets account for the rest.
Five funds in the same category have been on the scene for the past couple of years. MCB Dynamic Asset Allocation Fund, which boasts AUMs of about Rs399 million, is by far the largest in terms of assets under management. But Faysal Asset Allocation Fund has yielded the highest return, 38 percent, in the first nine months of the fiscal year, according to industry reports.
Though, the AUMs of asset allocation funds in Pakistan have remained largely flat, with little growth here and there, competitor fund managers believe there is definitely room in the market for another fund.
"A new fund can definitely be marketed, given a good investment proposal and the ability to find a niche market", says Muhammad Asim, Fund Manager at MCB Asset Management.
"Asset allocation funds, by their nature require a higher risk profile in investors. While the upside is significantly higher, investors must have a long term strategy with the ability to withstand some losses", says another fund manager.
Yet, at a time when volumes in the equity market are thinning by the day, and clouds of uncertainty prevail with the impending imposition of Capital Gains Tax, it may be an uphill task for BMA Funds to attract risk taking investors.
Of course, they might be having a strategy to deal with these challenges; there is little we know at the moment, as, despite repeated attempts, BMA fund managers were not available for comment on the launch of BMA Merewether Asset Allocation Fund.