The Mutual funds Industry experienced a remarkable average growth rate of 41 percent in assets under management, which reflects the increasing awareness of mutual fund products and a shift in appetite of investors from plain vanilla bank accounts to more structured investments.
This was stated by Rashid Mansur, CEO, JS Investment Limited in an exclusive interview to The News Tribe.
The Mutual Fund Industry was 1.8 percent of GDP (banking deposits: 31 percent & NSS: 11 percent of GDP) at the end of 2010, which is a lot below peer and regional averages. For example, AUM to GDP ratio of India is 7 percent while Turkey is at 3 percent, though the regulatory and structural frameworks are more or less same. Despite these statistics, there is still a lot of room for growth and improvement in this sector.
In the last one decade, the assets under management of the industry grew at a rate which was ten times more than deposits with banking institutions, other non-banking finance institutions and national savings schemes. The average growth rate for deposits with banks grew at a rate of almost 15 percent in the last one decade, while for national savings schemes, growth stood at almost 9 percent.
The number of people coming in the industry cannot be called as satisfactory, though it has improved over a period of time. As per data made available by the Mutual Fund Association of Pakistan (MUFAP), there were over 124,000 investor’s accounts in open-end funds under management of all AMCs. The retail constitutes a very decent percentage of the said accounts (95 percent) but assets are at low levels of 22 percent of total industry assets.
Furthermore, Pakistan being a populous country of around 180 million individuals, this figure could have been much higher but there is a room for more retail penetration on part of AMCs, and I feel that decent efforts are being made to increase awareness level amongst the masses.
Unlike other saving schemes where withholding tax is deducted on profit, there is no tax applicable on investment in any mutual funds, other than Capital Gains Tax, which is exempted in case the investment is held for at least one year. Individuals can also avail tax credit on their income tax for the year if they are invested in mutual funds and pension funds. This tax savings facility can be availed by both salaried and self-employed individuals in accordance with the Income Tax Ordinance, 2001. The amount of tax credit entitlement is subtracted from annual income tax payable for the year thus giving an overall tax saving.
Mutual Funds are for everyone, we actually mean it. They cater to needs of all investors without any specific segregation on bases of their investment amount, like an investment as low as 100 rupees (par value of a single unit) can be made by any investor. An investment solution is available for everyone according to the risk appetite of that investor.
JSIL subscribes to dynamic business management and continues to appraise itself in line with the changing business cycles. Post the 2008 crisis, JS Investments was repositioned in line with the changing ground realities of the investment management industry resulting from prevalent macro economic conditions. After a detailed SWOT Analysis of JS Investments, our Vision, Mission and Statement of Broad Policy Objectives were revised. Consistent value creation for our clients coupled with maintaining high standards of ethical behavior and fiduciary responsibility form the bed rock of this transition; along with focus on taking products to the people through a highly talented, diligent and diverse skill set of people working at JSIL.
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