Islamic Funds for Financial Planning – Giving best of both worlds Al Huda - International Conference on Islamic Fund and Investment

Outline Objective of this presentation Need for Financial Planning How Islamic Funds in the market can help achieve your Financial Objectives Growth in Islamic Funds and Way Forward

Objective To explain the importance of Financial Planning and to illustrate that Islamic Funds are fully poised to cater to all financial needs while strictly abiding with Shariah Principles

The importance of Financial Planning

The importance of Financial Planning - Concerns  Political instability  Rapid political & economic changes  Demographic changes  Businessmen concerns  Large number of dependents

The importance of Financial Planning  We have a population of almost 190 million people  The population growth rate is approximately 1.5-2% p.a.  The GDP growth rate has been 2-2.5% p.a. over the last 2 years  The unemployment rate amongst the youth is over 7%  The average monthly salary in Pakistan is PKR 7500 ( with 35% of the population below the international poverty line)  The average annual inflation for the last 10 years has been close to 11% Aren’t these numbers thought provoking enough??

The importance of Financial Planning We know that money tomorrow is not worth the same as money today. Consider a fixed monthly expense of PKR 30,000 p.m. today over time…. Inflation: 11.4% - CPI average Source: Pakistan Statistical Yearbook 2011, Federal Bureau of Statistics What costs PKR 30,000 today will cost over PKR 250,000 in 20 years

How to hedge against these growing expenses?

The importance of Financial Planning Inflation: 11.4% - CPI average Source: Pakistan Statistical Yearbook 2011, Federal Bureau of Statistics Savings account returns assumed at 6% per annum Equity Return is the CAGR of KSE 100 for Investments via Financial Planning can help you fight these growing expenses

The importance of Financial Planning At every stage the consumer is making a choice which is induced by his environment (e.g., friends and family) and his current lifestyle (job, family size etc). He makes a decision hoping that it will enrich his lifestyle Inflation Children’s Education Maintenance of standard of living Daughters’ Wedding     Saving & Investment Needs Savings for retirement   Savings for Hajj for self & parents Seeking avenues for fulfilling these needs

FINANCIAL PLANNING VIDEO

Islamic Funds can help achieve your Financial Objectives

Islamic Funds for your Financial Objectives According to a survey conducted by AC Neilson for UBL Fund Managers in 2011, 43% of the surveyed individuals preferred investing in Islamic Financial Products while only 23% preferred Conventional Financial Products

Islamic Funds for your Financial Objectives Meeting Short-term & Emergency needs  Cash Funds Regular Income to meet Growing Expenses  Low Risk Income Funds

Islamic Funds for your Financial Objectives Growing Wealth Over the Long-term  Equity Funds and Sukuk Funds Planning for your Children’s Higher Education & Marriage  Children Savings Plans Planning for post-retirement years  Voluntary Pension Schemes

Islamic Funds for your Financial Objectives Cash Funds (To meet Meet Short-term & Emergency needs)  There are currently two Islamic Money Market Funds in the industry comprising over PKR 7 billion of AUM  Money Market Funds invest in low risk and liquid instruments that can help clients meet their short term needs and enables them to access their money immediately at a time of emergency PeriodIslamic Funds Conventional Funds 1 year rolling11.5%12.1% 2 year rolling10.9%11.6%

Islamic Funds for your Financial Objectives Low Risk Income Funds (For Regular Income to meet Growing Expenses)  There are currently ten low risk Islamic Funds in the industry comprising over PKR 25 billion of AUM  Low Risk Income Funds invest in high quality instruments of a medium to long term tenure that can help clients earn a regular income at an attractive profit rate PeriodIslamic Funds Conventional Funds 1 year rolling11.6%12% 2 year rolling10.2%10.9%

Islamic Funds for your Financial Objectives Equity Funds (Growing Wealth Over the Long-term)  There are currently five Islamic Equity Funds in the industry comprising over PKR 6.5 billion of AUM  Islamic Equity Funds invest in equities of Shariah Compliant businesses that earn superior returns and help clients earn their long-term goals PeriodIslamic Funds Conventional Funds 1 year rolling6.7%-4.6% 2 year rolling29.8%12.6%

Islamic Funds for your Financial Objectives Sukuk Funds (Growing Wealth Over the Long-term)  There are currently four Islamic Sukuk Funds in the industry comprising over PKR 2 billion of AUM  Islamic Sukuk Funds invest in Corporate and Government Debt structured in compliance with the Shariah and can help clients earn high returns in the long-term PeriodIslamic Funds Conventional Funds 1 year rolling3.9%4.2% 2 year rolling6.7%4%

Islamic Funds for your Financial Objectives Voluntary Pension Schemes (Planning for post-retirement years)  There are currently six Islamic Pension Funds in the industry comprising over PKR 1 billion of AUM  Islamic Pension Funds comprise of Equity, Debt and Money Market Funds that clients invest in as per their Risk Profile and save for their retirement while also gaining attractive Tax Benefits PeriodIslamic Funds Conventional Funds 1 year rolling Equity:4.0%-5.5% Debt:10.1%12.1% Money Market 9.6%11.2% 2 year rolling Equity28.5%12.5% Debt:9.5%10.5% Money Market 8.8%7.5%

Islamic Funds for your Financial Objectives Children Savings Plans (Planning for your Children’s Higher Education & Marriage)  This is a fundamental need that has not been specifically addressed by Islamic Funds  However, this is an area that is being worked upon and solutions will be available to clients shortly

Growth in Islamic Funds & Way Forward

Assets Under Management Islamic Funds although a small percentage of overall Islamic Deposits (9%), are growing as a percentage of Islamic Deposits Overall Growth in Islamic Funds

Year on Year Growth The Year on Year Growth of Islamic Funds has been around 50% for the last 3 years Overall Growth in Islamic Funds

Market Share Islamic Funds constitute 16% of the Total Assets Under Management and the share has grown significantly over the last 3 years Overall Growth in Islamic Funds

Way Forward for Islamic Funds  Islamic Funds are fully poised to cater to all the basic financial needs and Asset Management Companies are working towards bringing solutions for more specific needs  Islamic Funds have witnessed commendable growth over the last 3 years and with increasing inclination towards Shariah Compliant investments the growth will only accelerate  However, the following areas demand more focus:  More needs to be done for the marketing of Islamic Funds, a large segment of the population is not even aware of the options they have for Islamic Investments  The Investments Solutions needs to be more clearly differentiated from their conventional counterparts  The structure and mechanism of Islamic instruments needs to be explained with more clarity and detail to ensure investor comfort in the instrument’s Shariah Compliance  We as Islamic Fund Managers are on the right path of growth and with more attention on the highlighted subjects we will be able to provide clients with the right Investment Solutions in the most Shariah Compliant manner

Thank you!!