Policymakers, regulators must enhance effectiveness of mutual fund industry

KARACHI: Securities and Exchange Commission of Pakistan (SECP) Policy Board Chairman Khalid Mirza has urged policymakers and regulators to enhance the effectiveness of the mutual fund industry as an important pillar of the financial system, and suggested to target retail investors.

Speaking at the launch of Mutual Funds Association of Pakistan’s (MUFAP) yearbook 2018, he said the aggregate size of the industry was Rs25 billion in 2002, which has now grown to around Rs600 billion, ie over $4 billion.

It was spread over some 275 funds that were managed by 19 asset management companies.

“The total assets under management are, however, only two percent of gross domestic product (GDP) or equal to six to seven percent of market capitalisation,” Mirza said.

In comparison, India’s mutual fund industry was $328 billion in size; it was 13.6 percent of GDP, and around 20 percent of market cap, whereas in the United States mutual funds aggregate about $19 trillion, they were about 70 percent of GDP, and about 25 percent of market cap.

Mutual funds must target retail investors it they were to play their proper role.

“Actually, with banking spreads being around six percent and mutual fund fees being 1/2 to two percent, mutual fund managers have room to maneuver,” he added.

He urged regulators to proactively encourage innovation and development of new products to provide depth to the capital market.

Mufap is the trade association representing Pakistan's asset management industry comprising of 19 asset management companies managing 281 funds (in conventional and Shariah-compliant range) with total assets under management (AUMs) of Rs607 billion as of January 31, 2019.

Earlier, Mutual Funds Association of Pakistan Chairman Farid Ahmed Khan, while inaugurating the event, highlighted that the mutual funds industry has played an important role in improving the savings rate and was committed to improving this further.

He said the mutual funds industry in most

developed markets was recognised for its role in the economy as a seamless conduit to asset markets, such as debt and equity, both public and private.

“In Pakistan, the industry was still in a nascent state and stands poised to grow tremendously given the right kind of support and guidance.”

The future of the mutual industry was dependent on increasing awareness across the country, efficient means of distribution and innovative product development.

The need of the hour for the industry, the regulator and the government at large was to work together for collective and public interest, he added.

“It is also imperative that the taxation and pricing issues are resolved at a fast pace so that

unnecessary time and resources are not spent on dealing with these, but rather spent productively on the growth and development of the

industry,” Mutual Funds Association of Pakistan chairman said, adding that the industry needed a level playing field with other savings avenues such as National Savings Schemes in order to prosper.