Deal Idea, 6 Feb 2011: Recently the Mutual Fund Association of Pakistan (MUFAP) launched its
year book for the year ended 30 June 2010 which published some interesting results. For instance, since 2008 Assets Under Management (AUMs) have declined by 41% as compared to 2010 while number of funds have increased from 97 to 135 which means that the AUMs have actually halved from PKR 3.4 billion to PKR 1.5 billion per fund.
Out of 25 Asset Management Companies (AMCs), 1 has a market share of greater than 10% while 7 have a market share between 5% to 10% the remaining 17 have a market share of less than 5%. Further analyzing the annual average returns of 25 AMCs, only 15 AMCs offered a return higher than 10% while 6 offered returns between 5% to 10% and the rest offering returns even below 5%. Comparing this with 1 year return on fixed deposits of approx 11% over the same period means that 40% of the AMCs did not add any real value to the money of unit holders which is depicted by a decline in number of unit holders from 221,332 to 217,410 over the same period.
The point I am trying to make is that the decision taken by Arif Habib Investment and MCB Asset Management to merge together is the first of the few as based on the short term economic forecasts it will become very tough for funds to match returns offered by commercial banks of 13% to 16% on fixed deposits hence further consolidation in the industry could be seen through mergers between AMCs or acquisitions of individual funds.
Please note that the above analysis excludes the impact of merger between Arif Habib Investments and MCB Asset Management.
