Assets under mutual funds industry hit all-time high of around Rs2tr

KARACHI: Assets managed by the mutual funds industry hit an all-time high of Rs1.965 trillion in November, data showed on Wednesday, a 5 percent increase over the previous month.

The equity assets under management rose by 17.9 percent month-on-month to Rs116 billion in November, the highest level since August 2022, according to data from Arif Habib Limited.

Because of the high interest rates and remarkable performance of the stock market, analysts surmise that a primary factor contributing to the increase in mutual fund assets under management (AUM) was people’s growing inclination towards these instruments as a means of saving and investing.

“The mutual fund industry is growing as it is a preferred avenue for saving and investment,” said Samiullah Tariq, the head of research at Pak-Kuwait Investment Company.

“Fixed income mutual funds are growing as they are a tax-efficient way of saving. As interest rates are high, people prefer investing in fixed-income mutual funds,” Tariq added.

According to data, fixed-rate assets increased by 32.7 percent to Rs66.4 billion in November from the previous month. The Shariah-compliant income assets increased by 21 percent month-on-month to Rs338 billion in November.

Money market funds that make investments in debt products own the lion’s share of AUM. In November, the AUM invested in money market funds was Rs548 billion, a decrease of 4.6 percent from October.

Because of the high-interest rates in the country, according to Sana Tawfik, an analyst and economist at Arif Habib Limited, the fixed-rate income asset saw a notable increase.

“The fixed asset class is the most profitable asset class as the policy rate hovers at a record 22 percent,” Tawfik said.

Because Islamic banks are exempt from the minimum deposit requirement, they encourage their clients to purchase Islamic funds from their asset management firms rather than making fixed deposits at banks, which has resulted in a significant rise in Islamic income cases, she said. Thus, to save deposit costs, their clientele switched to their asset management companies. The returns that Islamic bank depositors receive are not higher, she said. “Given the strong performance of the stock market, it is evident that the portfolio has begun to progressively move from the fixed income to the equities classes in light of the likelihood of a rate cut in the coming months.”