Asset management companies play a significant part in raising awareness about smart savings mechanisms through which saved money does not lie idle or get devalued but rather, earns a profit over it. Mir Muhammad Ali, CEO of UBL Fund Managers, speaks on Pakistan’s multibillion rupees asset management industry.
Please tell us something about your professional background?
I completed my Masters in Business Administration from IBA in 1989 and then proceeded to advance my career through various companies including ANZ Grindlays Bank, United Bank Limited, IBM World Trade Corporation. I joined UBL in 2000 where I worked for 3 years followed by Asian Development Bank as an Investment Officer. In 2005, I joined UBL Funds as the Chief Executive Officer.
Can you please explain the operations of UBL Funds?
UBL Funds is Pakistan’s first Asset Management Company that was launched by a bank in 2001. Our performance history dates back to over 12 years during which we launched different Funds, Investment Plans and Pension Schemes tailored to suit a variety of investors’ needs. We are now recognized as one of the country’s largest and most prominent asset management company, with a portfolio of around Rs.44 Billion.
How many asset management companies are present in Pakistan?
Currently, there are 25 asset management companies operating in Pakistan. The total size of the industry sums up to around Rs.375 billion. UBL Funds ranks at number two, in the private sector among the asset management companies.
What is the basic definition of Mutual Funds?
Mutual Funds are a pool of funds from different investors that is further invested in various avenues. The profit made via these investments is passed on to the investor as Returns on Investment. The entity managing such a pool of funds is known as an asset management company.
What is the current situation of financial sector of Pakistan?
The financial sector of Pakistan is doing extremely well at the moment. Asset management companies play a significant part in raising awareness about smart savings mechanisms through which saved money does not lie idle or get devalued but rather, earns a profit over it.
There is still a need for support from the government and their active participation is required in further promoting the mutual fund sector, in order to create awareness amongst potential customers so they can secure their investments and have knowledge of the various investment options available.
The pool of funds raised by Asset Management Companies and its subsequent investments actually helps the government in privatizations, launching their bonds or initiating projects that benefit the citizens of Pakistan. It goes without saying that the Mutual Funds industry can be a core contributor towards the increase in propensity to save as a habit.
If a person has a certain amount of money, he will either wish to invest it in some business or deposit it in the bank, why should he go for investing in Mutual Funds?
When an individual saves for the future, he needs to ensure that his savings grow faster than the increase in the inflation rate and hence secure his funds against devaluation. Compared to saving in a bank account, Asset management companies allow you to make investments based on each individual’s requirement, which may simply be to make your savings grow above the rate of inflation for the future, save for post-retirement life, take a shot at equity investments or save for their children.
Banks do offer a certain return in deposits but most of the times it is less than the fast paced rate of inflation, thus the value of your money continues to lose purchasing power despite your frequent contributions to the savings pool.
With Mutual Funds based investing, it’s easier to save for long-term goals with a peace of mind. For instance, parents can start investing small sums of money when their child is born to raise enough capital in the next 15-20 years that allows them to meet his or her education & marriage expenses or requirement of a large lump sum amount, comfortably.
Similarly Retirement Savings Fund or Voluntary Pension Schemes also offers an avenue that helps you save up for a sustainable post-retirement life especially if you start investing for it early on.
The chances of growing your savings with high yield equities are also an attractive proposition especially if you have a long term saving horizon. Karachi Stock Exchange alone gave approximately 23% returns per annum in the last 10 years; whereas the inflation rate during the last 10 years has been around 11 to 12%. This proves that the equity market has the potential to beat inflation over the medium and long term as well.
Hence proving that with the capacity to offer need based, tailor-made plans for each individual’s financial goal in life, the mutual funds industry has a lot more potential to assist people in achieving their goals successfully
Who is your target audience?
UBL Funds caters to corporates as well as retail clients along with a separate wing working to facilitate the investments of non-resident Pakistani’s in the UAE.
On the corporate front, we provide a dedicated team of fund managers to facilitate small, medium and large corporate entities and institutions with a fertile ground for their investments to grow and flourish.
On a retail level, our investment requirement starts from a minimum amount of Rs. 500 which means practically everyone can invest. We aim at people from all age groups but we specially encourage college going boys and girls to develop saving habits and learn how to achieve their short term goals. Another very important target market is mid-tier executives who have approximately 30 years till retirement. We as a socially conscious company try and make them aware of reasons why they must start saving at that age and ensure financial independence after retirement.
Internationally, UBL Funds offers non-resident Pakistani’s the opportunity to invest in Pakistan by being the first Asset management company of a Pakistani origin to receive permission of providing a diverse range of investment from fixed income, commodity and equity products in UAE.
What schemes do you offer?
UBL Funds offers money market funds, fixed income funds, equity funds, asset allocation funds, capital protected funds and pension schemes. Other than plain vanilla funds, we also offer customized Investment plans with multiple underlying funds that can assist investors to save up for their children’s’ education or marriage, accumulate wealth, develop an equity portfolio or simply prepare for their retirement.
Why should an investor prefer UBL Funds over other asset management companies?
UBL Funds has a track record of over a decade. We have been awarded the High Management Quality Rating of ‘AM2’ by JCR-VIS Credit Rating Company and are also a GIPS compliant organization. This indicates towards maintaining and fulfilling each and every high requirement that comes with corporate governance and best business practice since the last 10 years.
We not only manage our clients’ assets but also their trust in us and are proud to have patrons who have been investing with us for over a decade. UBL Funds has not only maintained excellence in its standards of management but has also pioneered the advent of Principal Protected Funds in Pakistan. In a nutshell, we strive to keep investor’s interest above our own interest.
How does your rate of return vary from other companies?
Rate of returns not only tend to vary from time to time and product to product but is also dependent on a number of external factors like the socio-political situation in the country, financial stability and monetary and fiscal policies for each year. It’s practically not possible for any company to claim a standard return or a consistent number since local and international market situations fluctuate on a daily basis
What does Shariah Compliant Investments mean?
Shariah compliant investments are made according to the laws set by Islam and are strictly supervised by Shariah Scholars. Quite recently, we launched an umbrella brand by the name of Al-Ameen Funds which offers all of UBL Funds’ Islamic Investment solutions and covers an expansive array of Shariah Compliant mutual funds, Investment plans and Pension Schemes.
What is the difference between the rate of return of a Shariah Compliance Investment and a Conventional Investment?
There is not a huge difference in the rate of return of a Shariah Compliance Investment and a Conventional Investment. When a person decides to invest in any of the Islamic products, we ensure that his investment meets all the guidelines set by Shariah. The rate of return is almost the same in Shariah compliant investments as compared to other conventional investments since Islamic Investment instruments like Sukuks and Islamic bonds are now globally accepted and encouraged
How do you compare banking sector growth with Mutual Funds?
In western countries, the Mutual Funds market is greater in size as compared to banking sector. The case is different in Pakistan. Since it is an infant industry in Pakistan, we represent only around 5% in comparison to the banking industry. Nevertheless, the growth rate of Mutual Funds is higher than that of the banking sector.
How can government offer their support and assistance?
In my opinion, the government needs to reduce taxation of this sector and offer industry wide incentives to encourage development & expansion of this industry. Extraordinarily high taxes ultimately sours the investment experience of customers and also makes margins narrower for the operators hence making sustainability a concern
What is your reach in Pakistan?
We have independent Smart Saving Centers in Karachi, Lahore and Islamabad. In addition, we can also be accessed through UBL Bank branches across Pakistani. UBL Funds is also present in UAE where it offers a host of fixed income and Equity Funds along with Retirement plans.
Where do you see this industry in the next 4 to 5 years?
I foresee a definite growth in this industry in the coming years and I think the regulators contribute more to provide level playing field in this industry. FED and sales tax on Mutual Funds need to be reviewed because they build up burden on a customer. Once this has been taken care of, the growth & development of this industry is going to get undoubtedly better. I also believe that universities need to focus on this subject in order to produce equipped Human Resources for a fast growing industry.