Marketing of Mutual Funds in Pakistan: Opportunities & Challenges By Sohail Yaqoob

History of Mutual Funds in Pakistan Government of Pakistan established NITL which launched first Open End Equity Fund in Pakistan – NIT 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 More funds launched in private sector 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 endRs bn Closed endRs bn Open end34 Closed end22 Public Sector1 Private Sector29 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 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 1924 The GREAT DEPRESSION of 1930s in USA has stalled the growth of mutual funds sector, like many other economic activities Yet it was, 1990s that mutual funds became mainstream investments in the USA and around the globe At the end of June 2006, total mutual fund assets all over the world were $ trillion History and Inception of Mutual Funds Worldwide Mutual Fund Industry

Asia/Pacific Mutual Fund Industry

Islamic Mutual Fund Industry One of the fastest growing sectors BUT As compare to over all mutual fund industry, it is at infancy stage of growth and development The 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

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

18 Size of Islamic Mutual Fund in Pakistan - Rs bn Market Share of Al Meezan Investments - Rs bn

19 Total Mutual Fund Industry in Pakistan - Rs. 171 bn Market Share of Al Meezan Investments - Rs 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  s 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 industry Mass awareness and education about mutual funds Strengthening distribution network Understanding the fact that related financial industries are not a threat Promoting healthy business practices and ethical code of conduct Disseminating timely information Establishing affiliations with mutual funds associations in other countries and promote one-to-one contacts Media 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