The political environment and economic challenges of the country have taken a toll on the trading of Pakistan Stock Exchange, showing a gradual declining trend over the past one year, which caused Mutual Funds sector to switch its investment in the equity market to the money market.
According to the official data, mutual funds of the equity sector showed an overall outflow of Rs. 7.5 billion from May to Dec 2017 from the equity category. On the other hand, the money market funds have received a net inflow of Rs. 36.4 billion.
The substantial outflow was witnessed in the equity funds with a majority of it being shifted towards the asset allocation funds based with major investment in money market during the fiscal year.
It is pertinent to mention here that the equity mutual funds constituting 45.3 percent of total mutual fund net assets in June 2017 have been the mainstay, growing at an average rate of 28.1 percent from FY13-17. However, with a bearish trend in the equity market during the second half of CY17, the share of equity funds had declined to 39.9 percent by December, 2017.
Mutual funds managers launched different asset allocation funds to mitigate the risk of losing money in order to compensate for the losses.
Besides, the availability of diverse products like equity and money markets funds have given investors the freedom to quickly switch their investments based on changing market dynamics, expectations and risk appetite.
The flexibility has helped contain the size of the industry’s asset under management despite volatility in equity returns. As at June 30, 2017, there were 20 Asset Management Companies managing 233 funds including the open end, closed end funds and Voluntary Pension Schemes. The asset under management decreased from Rs. 622.35 billion as by June 30, 2017, to Rs. 620 billion as of August 2018.