The Security and Exchange Commission of Pakistan (SECP) has revised the investment limits for pension funds under the Voluntary Pension System. A statement issued by the Commission here on Friday said that investment limits were revised in view of re-composition of sectors by the Karachi Stock Exchange (KSE). The re-composition led to over-exposure of pension funds' investments in some of the merged sectors.
Therefore, revision in investment policy has been introduced to help pension funds diversify their portfolio by managing the concentration risk. In order to promote savings, the SECP had allowed launch of both conventional as well as Shariah-compliant pension funds. A pension fund normally comprises three sub-funds like equity, debt and money market fund. Over the past few years, Shariah-compliant pension funds have gained popularity. However, there is a shortage of short-term Shariah-compliant instruments.
In order to meet the need for Shariah-compliant money market sub-funds, overall weighted average time to maturity for such sub-funds as well as time to maturity for each Shariah-compliant government securities in portfolios of these funds has been substantially enhanced to enable them to improve both the credit quality and yield of their investments.