What is an Asset Management Company?
An Asset Management Company (“AMC”) is a specialized financial institution that provides asset management services to both institutions and individual investors. In Pakistan, AMCs are licensed and regulated by the Securities and Exchange Commission of Pakistan (SECP) under the Non-Banking Finance Companies Rules, 2003 and Non-Banking Finance Companies and Notified Entities Regulations, 2008.
What is a Collective Investment Scheme?
A Collective Investment Scheme is an investment vehicle comprising a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, commodities, securities, treasury bills and other capital markets instruments. A Collective Investment Scheme is established under Non-Banking Finance Companies and Notified Entities Regulations, 2008 by way of a trust deed that offers for sale of its units and entitles the investor on demand to receive his proportionate share of the net assets.
Who is a Trustee?
Trustee is a person who meets the eligibility criteria and is granted registration as an eligible person by Securities and Exchange Commission of Pakistan (SECP) to act as Trustee.
What is the Role of CDC Trustee?
The role of CDC as trustee is to ensure compliance with the NBFC Regulations and to protect the interest of individual investors. Accordingly, CDC performs the following functions on a day to day basis:
- To execute the instructions received from the fund managers/investment advisors
- To process transactions/payments/receipts in accordance with the instructions,
- To maintain record of the transactions entered into on a daily basis,
- To ensure compliance with various provisions of the NBFC Regulations, NBFC Rules, trust deeds, custodial agreements and any other constitutive document,
- To monitor NAV declared by the open-end funds on a daily basis,
- To ensure the safekeeping of the assets of mutual funds.
What types of funds are available in Pakistan?
Security & Exchange Commission of Pakistan has categorized the mutual funds as under:
- Equity Scheme: An equity scheme or equity fund is a fund that invests in Equities more commonly known as stocks. The objective of an equity fund is long-term growth through capital appreciation, although dividends and capital gain realized are also sources of revenue.
- Commodity Scheme: These funds provide investors with a limited exposure in commodity futures contracts as available on the commodity exchange.
- Balanced Scheme: These funds provide investors with a single mutual fund that invests in both stocks and debt instruments and with this diversification aimed at providing investors a balance of growth through investment in stocks and of income from investments in debt instruments.
- Asset Allocation Fund: These Funds may invest its assets in any type of securities at any time in order to diversify its assets across multiple types of securities & investment styles available in the market.
- Fund of Fund Scheme: Fund of Funds are those funds, which invest in other mutual funds. These funds operate a diverse portfolio of equity, balanced, fixed income and money market funds (both open and closed ended).
- Shariah Compliant (Islamic) Scheme: Islamic funds are those funds which invest in Shariah Compliant securities i.e. shares, Sukuk, Ijara Sukuks etc. as may be approved by the Shariah Advisor of such funds. These funds can be offered under the same categories as those of conventional funds.
- Capital Protected Scheme: In this type of scheme, the payment of original investment is guaranteed with any further capital gain which may accrue at the end of the contractual term of the Fund. Such funds are for a specific period.
- Index Tracker Scheme: Index funds invest in securities to mirror a market index, such as the PSX 100. An index fund buys and sells securities in a manner that mirrors the composition of the selected index. The fund’s performance tracks the underlying index’s performance.
- Money Market Scheme: Money Market Funds are among the safest and most stable of all the different types of mutual funds. These funds invest in short term debt instruments such as Treasury bills and bank deposits.
- Income Scheme: These funds focus on providing investors with a steady stream of fixed income. They invest in short term and long term debt instruments like TFCs, government securities like T-bills/ PIBs, or preference shares.
- Aggressive Fixed Income Scheme: The aim of aggressive income fund is to generate a high return by investing in fixed income securities while taking exposure in medium to lower quality of assets also. An investor can invest in any of the above categories of funds in accordance with his requirements and appetite for risk. For example those who want to earn high returns over a longer period can invest in Equity Funds whereas those who want to invest for short term with reasonable return can invest in Money Market Fund.
- Voluntary Pension Scheme: Voluntary Pension Schemes, under VPS Rules 2005, facilitate savings for individuals for their retirement period. The contributions received from the Participants may be invested in four underlying sub-funds namely equity, commodities, debt and money market funds based on the allocation option selected by the Participant according to his/her risk/return appetite.
How can I invest in Mutual Funds?
Investments can be made in mutual fund by visiting any Sales / Designated Distribution Centre of Asset Management Company and filling the prescribed form and giving a crossed cheque payable to the account in the name of the Fund.
What is SECP?
The Securities and Exchange Commission of Pakistan (SECP) was established under Securities and Exchange Commission of Pakistan Act, 1997, with a mandate to regulate the corporate sector, capital markets, insurance companies and other non-banking finance companies. The SECP has oversight of various external service providers to the corporate and financial sectors, including chartered accountants, credit rating agencies, corporate secretaries, brokers, surveyors and other related entities.