Marketing of Mutual Funds in Pakistan: Opportunities & Challenges

By

Sohail Yaqoob

History of Mutual Funds in Pakistan

1962 - Government of Pakistan established NITL which launched first Open End Equity Fund in Pakistan NIT 1966 - 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 1994-95 - More funds launched in private sector

Mutual Funds Industry in 2006

Total Industry Size billion Open end

Closed end

Rs. 129.73 bn Rs. 41.33 bn

Rs. 171 (US$ 2.83

billion)
Open end Closed end Total number of Funds 34 22

56

Public Sector Private Sector Total number of AMC -

1 29

30

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

Year-wise Growth of Mutual Funds Since 2001

Total Mutual Funds Industry as % of GDP for the year 2005-2006

Source: State Bank of Pakistan

Mutual Funds Industry to Bank Deposits (September 2006)

Source: State Bank of Pakistan

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Worldwide Mutual Fund Industry

History and Inception of Mutual Funds
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 $ 19.413 trillion

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 Pakistans vs. World Wide Islamic Mutual Funds

Total Mutual Fund Industry in Pakistan - Rs. 171.00 bn Size of Islamic Mutual Funds in Pakistan-Rs. 9.12 bn (5.33%)

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Size of Islamic Mutual Fund in Pakistan Rs. 9.114 bn Market Share of Al Meezan Investments Rs. 6.925 bn

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Total Mutual Fund Industry in Pakistan Rs. 171 bn Market Share of Al Meezan Investments Rs. 6.925 bn

as of September 30, 2006

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Why Mutual Funds lagging in Pakistan?

Controlled by Public Sector, initially Lack of awareness Interest rates were too high Education Distribution Low savings

How many people know?

What is Mutual Fund? What are different types of Mutual Funds? Why an individual invest in Mutual Fund? How can purchased? Mutual Funds be

What are the Advantages of investing in Mutual Funds?

Experienced and Professional Fund Management Diversified portfolio Economies of Scale Liquidity Convenient processing Affordability Transparency Stringent regulator

What should be done to become a significant contributor in the global market? (Opportunities)
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 Cont the markets

What should be done to become a significant contributor in the global market? (Opportunities)
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 nonnon-traditional channel of distribution
Cont

What should be done to become a significant contributor in the global market? (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

How can Mutual Funds be marketed?

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 Emails

Providing up to the mark value addition services

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 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

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

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

Challenges for Mutual Fund Industry

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

The winning formula is the troika of performance, service and trust for meeting longterm goals and becoming a true success story in the worlds financial markets.

Thank you