Lastest News

Don't stop, keep going is the way, regardless of whatever you do. You can accomplish objectives in motion but while stopping you loose whatever you already have. SAQIB OMER SAEED  - - - UAE Properties have still a lot to offer, game starts from where it stop, big player is the one that stays. SAQIB OMER SAEED - - - Wishing everyone a happy NEW ISLAMIC YEAR. SAQIB OMER SAEED

07
Jun
2010
Fund Managers need to access masses

Stock markets have always been a point of attractive investments. The higher level of risk or volatility in stock markets induces investors to foresee higher returns to compensate this risk. But the point that is highly valid is opportunities in stock exchange for a common man. I am talking about people that save money from their salary or monthly income. They are those who have lesser technical knowledge but ambition to get handy returns to meet their future monetary requirements.

I have mentioned several times on my blogs that one of the reasons of financial crises across the globe is that individuals were thinking like businesses, businesses were behaving like banks and banks were dealing like hedge funds. The importance of understanding of roles is very important. Stock market is not a lottery scheme neither it is cinema ticket of three hours movie but unfortunately many brokers market it like same. When we are talking about investments in stock of a company, so it simply means that we are investing in a company as her owner. But in this world of greed people presents stocks like a lottery ticket that can convert return within days. Even it happens but it is not so good for common man to take position in stock market.

Investment in stock needs a detailed company analysis and analysis of industry to economy. It is always difficult to carry all these analysis for a common man but they generally take positions in stock market by seeing price boards. This is really a risk that can mature and once it matures people start crying.

Across the world Mutual Funds are the best place for common man to take investment exposure in stock market. Mutual Fund provides an opportunity to diversify even if you have five thousand rupees to invest. Other than this you can not get a diversified investment position with five thousand rupees.

As per the recent figures reported in National news papers (as on May 25 2010) through association of mutual funds Pakistan Mutual Fund industry is having a size of PKR 221 billion. This is consisting of PKR 187 billion on open end fund and PKR 34 billion in close end funds. As per economic survey 2008-09 there are 99 mutual funds active in the country, in this tally 76 are open end funds and 23 are close end funds.

Now if you see the size of Mutual Funds in Pakistan i.e. PKR 221 billion in comparison to total scheduled bank deposits of PKR 4.5 trillion (as on Jan 2010 by State Bank of Pakistan) so Mutual Fund Industry is just 4.9% of total deposits of scheduled banks. If I compare this central tendency by the Mutual Fund Industry of U.S.A. so as on Dec 2007 it was standing at US$ 11.5 trillion against Bank Deposit of U.S. banks of US$ 7 trillion. It means U.S.A. mutual fund industry before 2008 (pre actualize crises age) was 160% of total bank deposit of U.S.A. If we see our neighbor India so they have Asset under Management of INR 4933 billion (as on 2009, KPMG report) before their bank deposits of INR 5.8 trillion (Reserve Bank of India), it means Mutual funds assets are 84.5% of total deposits of Indian banks.

I can not deny that mutual funds or equity funds have been growing gradually in Pakistan but the proportion of investments in mutual funds is relatively lower in comparison to the bank deposits that offer lower returns. It is the requirement of time that fund management companies have to develop a marketing plan to access masses. The masses those are always keen to multiply their limited savings. Even though they have limited savings but the population of this country can turn it into a big success story.

Common man is not aware of technicalities. They can not understand how beta of stock can be calculated. They can not understand the risk management features of funds. It is necessary for fund mangers to develop easy to understand marketing material, so common man can access mutual funds with confidence. It is always better to train a mass marketing sales force for funds that shall access people who are interested to keep their funds park in National Saving schemes that offers return that even can not cover inflation.

We just need to have a new dynamic mindset for our mutual fund industry and it can be done by shifting the focus of selling funds to common man by aggressive marketing. We need to develop comprehensive and easy to use online fund management tools that offer one window solution to invest in fund. It shall cover majority of our youth that is above 50% of country’s total population. They can definitely invest in multiple of five thousands.

Regardless of many constraints to have saving for a common man in this country, they need to have a smart solution to invest minimum or whatever they have and mutual funds can do it. Equity, infrastructure, fixed income funds can be a popular terms in the country if they shall be marketed by fund mangers aggressively in the tone and style of common man. It is in fact a common man that can be more worthy to fund management than big investors. Generally they have long term plans and it is always better to have million clients than thousand. This is also a diversification within.


Comments Facebook Retweet Share Email Print
 

Raheel Javed Says:

I don't agree with you Mr. Mustafa. Kindly check out the marketing campaign that mutual funds are doing you will be amazed. I am also related to the mutual fund industry for last 4 years and at first place I also found it a bit dizzy but when I started to understand the dynamics I realize the facts. As far as legal frame work and secure regulated issues are concern SECP is the body that act like SBP to control these funds and make crystal clear for the people to park their capital in. Its just a mind set that people have in Pakistan that banks are big institutions and that there is a 0% chance or in our language zero risk factor involve in it. Mutual funds also give you risk free investment avenues where they can offer investments in money market or debt fund that invest in government securities, t-bills, bonds, and also in TDR that give you the flavour of bank investment as well. What I meant to say is that challenge is not credibility its about awareness that people need to develop in our country in order to understand things better.


10 - June - 2010 06:22:27 AM

Mustafa Abdur Razzaq Says:

Bank deposits are secure and thats why people prefer to keep their life time savings in them. Banks are regulated by a watchful eye of SBP which gives depositors a better sense of security. Same is the case with National Saving Schemes. Rate of returns may not be high but security level is certainly high. The biggest challenge before mutual funds industry is to first develop high level of credibility among the masses and then go for aggressive marketing of their products.


07 - June - 2010 02:23:46 PM

Saqib Omer Saeed Says:

Dear Mr. Mustufa, thanks for your comments. It is indeed my pleasure to have your view connected to my post. Your point is valid that regulatory framework is essential for mutual funds or even any fund management. But sometimes we have risks of lower regulatory frame work that market compensates by higher level of return. In Pakistan majority of the mutual funds are connected to reliable names in the market even this can not replace regulatory level security but people can not simply stop in investing in mutual funds by seeing one variable on weak side, yes probably they ask for a compensation of that risk variable. In modern world the level of investment in Mutual fund is highly related to the awareness of people about where they are investing and what exactly is the risk level. Sometimes that risk matures also but investor’s attitude is always relevant to his awareness of what investment is all about. In my experience of investment management people invested in highly unregulated sectors by considering the entire risk management tool. They care keeping certain amount of their saving in banks and allocate a manageable proportion in risk investments. Even when people lined up in queue to have TASER town plots regardless of considering how regulated the real estate sector is so they can even trust mutual fund that is even a sophisticated corporate sector worked by professionals. It is all about marketing. Once the fund sector gets growing regulations also come in the game. Investment is more a psychology than mathematics. Marketing is also a name of building trust in volitality. I am seeking for you input. I really appreciate your concerns.Thanks.


07 - June - 2010 04:04:11 PM

Mustafa Abdur Razzaq Says:

I have read few articles on this website and I am deeply impressed with your thinking and in-depth analysis on various subjects. I agree with you that a relative high risk in mutual funds is compensated by higher rate of return. I think the fact that mutual funds had very limited success limited in penetrating the general public is because of the general perception that performance of mutual funds is in a way dependent on the performance of stock market, and common people have very serious trust deficit in stock markets. That’s because in every other household, there is a story of a person suffering huge losses by investing in stocks. All this gave rise to an impression that stock market is only for those who have surplus cash to play with. Common salaried class people don’t have surplus cash. They have hard earned incomes which they want to protect even for lower returns. The marketing strategy should be to convince people that investing in mutual funds is very different from investing in stocks by inexperienced individuals. Mutual funds are run by experienced professionals who invest in diversified portfolio after conducting thorough research. Further mutual funds offer different products for different risk levels so that risk aversive investors can opt for product that suits their goals. On top of all this, mutual funds can attract lot of small savers if they are shariah compliant. I say this because there is vast majority of people who are averse to depositing their savings in interest bearing bank accounts and National Saving Schemes. But they unwillingly do so because of lack awareness about Islamic alternatives. I have seen so many cases where a barber, vegetable seller, laundry wala and other people belonging to informal sector of the economy keeping their savings in current account rather than saving account because of the issue of “interest”. If they can be shown the window of shariah compliant mutual funds then I presume there is a really large market to tap.


08 - June - 2010 12:22:47 PM

Raheel Javed Says:

I don't agree with you Mr. Mustafa. Kindly check out the marketing campaign that mutual funds are doing you will be amazed. I am also related to the mutual fund industry for last 4 years and at first place I also found it a bit dizzy but when I started to understand the dynamics I realize the facts. As far as legal frame work and secure regulated issues are concern SECP is the body that act like SBP to control these funds and make crystal clear for the people to park their capital in. Its just a mind set that people have in Pakistan that banks are big institutions and that there is a 0% chance or in our language zero risk factor involve in it. Mutual funds also give you risk free investment avenues where they can offer investments in money market or debt fund that invest in government securities, t-bills, bonds, and also in TDR that give you the flavour of bank investment as well. What I meant to say is that challenge is not credibility its about awareness that people need to develop in our country in order to understand things better.


10 - June - 2010 08:47:07 AM

Murad Gwaduri Says:

After Musharaf Government, frequent changes made in Mutual Fund Regulations by the Govt. which are not in favour of this Industry. Due to this changes the confidence of Investors are shaken. The investors has lost their principal amount even in low risk money market funds. This is the big sad back for Mutual Fund Industries and the due to this the fund size is decreasing. First we have to develop Confidence Building Measures among masses using media platform then we are able to do productive marketing.


03 - August - 2010 07:26:14 PM

Leave a Comment

Name *

Email *

URL

Comments *

 
 

Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

Latest Poll
Is Pakistan's economy growing?

DON'T KNOW

NO

YES


About Us
  • BIZOMER is a concept that carries the will of promoting knowledge, analysis and mobilization.