Alhuda CIBE - Mutal Funds Market in Pakistan

Marketing of Mutual Funds in Pakistan:

Opportunities & Challenges

BySohail Yaqoob

History of Mutual Funds in Pakistan

1962 - Government of Pakistan established NITL which launched first Open End Equity Fund in Pakistan – NIT

1966 - Government of Pakistan established ICP which launched series of Closed End Funds (25).

Only in the Mid 90s, the sprouts of mutual funds is witnessed

1994-95 - More funds launched in private sector

2006 - Total number of AMCs are 30 managing 56 mutual funds

Total Industry Size - Rs. 171 billion

(US$ 2.83 billion)

Total number of Funds - 56

Total number of AMC - 30

Open end Rs. 129.73 bnClosed end Rs. 41.33 bn

Open end 34Closed end 22

Public Sector 1Private Sector 29

Mutual Funds Industry in 2006

Major Market Players

National Investment Trust Ltd.

JS ABAMCO Ltd.

Arif Habib Investment Management Ltd.

Al Meezan Investment management Ltd.

Atlas Asset Management Ltd.

UBL Fund Managers Ltd.

Asset Management Companies in Pakistan

Mutual Funds in Pakistan

8

Year-wise Growth of Mutual Funds Since 2001

9

Total Mutual Funds Industry as % of GDP for the year 2005-2006

Source: State Bank of Pakistan

10

Mutual Funds Industry to Bank Deposits (September’ 2006)

Source: State Bank of Pakistan

First modern day mutual fund was opened in North America in 1924The GREAT DEPRESSION of 1930s in USA has stalled the growth of mutual funds sector, like many other economic activitiesYet it was, 1990s that mutual funds became mainstream investments in the USA and around the globeAt the end of June 2006, total mutual fund assets all over the world were $ 19.413 trillion

History and Inception of Mutual Funds

Worldwide Mutual Fund Industry

Worldwide Mutual Fund Industry

Asia/Pacific Mutual Fund Industry

Islamic Mutual Fund Industry

One of the fastest growing sectors BUTAs compare to over all mutual fund industry, it is at infancy

stage of growth and developmentThe wider acceptance of equity funds by Shariah Scholars in early 1990s paved the way to launch Islamic mutual funds.Currently, approximately 250 Islamic Institutions in some 75 countries, managing funds worth over USD $200 billion.

Comparison of Islamic vs World Wide

Mutual Fund Industry

Comparison of Pakistan’s vs. World Wide

Islamic Mutual Funds

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Total Mutual Fund Industry in Pakistan - Rs. 171.00 bn Size of Islamic Mutual Funds in Pakistan-Rs. 9.12 bn (5.33%)

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Size of Islamic Mutual Fund in Pakistan - Rs. 9.114 bn Market Share of Al Meezan Investments - Rs. 6.925 bn

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Total Mutual Fund Industry in Pakistan - Rs. 171 bn Market Share of Al Meezan Investments - Rs. 6.925 bn

as of September 30, 2006

Controlled by Public Sector, initially

Lack of awareness

Interest rates were too high

Education

Distribution

Low savings

Why Mutual Funds lagging in Pakistan?

What is Mutual Fund?

What are different types of Mutual Funds?

Why an individual invest in Mutual Fund?

How can Mutual Funds be purchased?

How many people know?

Experienced and Professional Fund Management

Diversified portfolio Economies of Scale Liquidity Convenient processing Affordability Transparency Stringent regulator

What are the Advantages of investing in Mutual Funds?

Cont…

What should be done to become a significant contributor in the

global market?

Putting collective efforts at industry level Comprehensive analysis of investors’ needs

and preferences Education of People about mutual funds at mass level Product innovations by launching specialized

products. Widening, broadening and deepening the markets Tapping overseas investor base

(Opportunities)

Cont…

What should be done to become a significant contributor in the

global market?

Marketing in semi-urban and rural areas Improving quality of service Quick dissemination of information Banking and other related industries to

utilize their network for mutual fund distribution

Expanding distribution network by discovering non- non-traditional channel of distribution

(Opportunities)

Understanding the importance of retail market

Separate funds for various investors’ segments.

Promoting standardize performance measurement procedures at industry level

Creating positive image about the fund and changing the nature of the market

Better technology aiming at providing quality service

What should be done to become a significant contributor in the

global market? (Opportunities)

Advertisement through Print Media Newspapers Magazines

Advertisement through Electronic Media Television Radio

Outdoor Advertising Hoardings Banners

Cont…

How can Mutual Funds be marketed?

Direct Marketing Personal Selling Telemarketing Direct Mail to existing as well as potential investors

Below the line activities (BTL) Participation in exhibition Information desk as public places Arranging seminars - Corporate as well as Educational

Selling through Intermediaries/Distributors

Cont…

How can Mutual Funds be marketed?

Comprehensive website and link with other popular websites Providing quick response to the Customers

through Distribution Centers Call Centers Emails

Providing up to the mark value addition services

How can Mutual Funds be marketed?

What about the target market?

Individuals Institution

Government Institutions Private Organizations Provident / Pension Funds

Trusts / Funds / Welfare Organizations

Educational Institutions Overseas investors Semi-urban and rural Segment

What would be the appropriate marketing strategy for each

segment?

Individuals Indirect selling through distributor network and regular campaigns through print and electronic media, exhibition

Institutions Personalized and direct marketing

Trusts / Funds / Welfare Organizations Direct selling as well as indirect selling through distributor network and creating awareness through appropriate media

Cont…

What would be the appropriate marketing strategy for each

segment? Overseas investors

Personalized and direct marketing, prompt and timely service, website links, advertisement in foreign print media, seminars / conferences, road shows

Educational Institutes Personalized and direct marketing

Semi-urban and rural Segment Electronic media, simplified literature in rural languages, visits by mobile vans with audio-visual aids, hoardings, wall paintings and educational films

Challenges for Mutual Fund Industry

Lack of diversified products range Understanding of investors’ need Public awareness at mass level Un-stability of Stock Market Dearth of liquid debt instruments Protecting and maintaining the integrity

and quality Ensuring performance Maintaining momentum to ensure viability Providing competitive returns

Cont…

Challenges for Mutual Fund Industry

Mitigating the Risk involved Inadequate Intellectual Capital Comforting & convincing with bad past

investment experiences

Budgetary constraints for Marketing activities.

Low saving and Investment oriented society Information disclosure and transparency Choosing appropriate distribution network Right timing to launch funds In time after sale activities Strict monitoring of regulators

Recommendations

Team work for the growth of mutual fund industryMass awareness and education about mutual fundsStrengthening distribution network Understanding the fact that related financial industries are

not a threat Promoting healthy business practices and ethical code of conductDisseminating timely information Establishing affiliations with mutual funds associations in other countries and promote one-to-one contactsMedia should play a more supportive and constructive role for awareness and disseminating information

The winning formula is the troika of performance, service

and trust for meeting long-term goals and

becoming a true success story in the

world’s financial markets.

Thank you