Karachi: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the Management Quality Rating of Al Meezan Investment Management Limited (Al Meezan) at ‘AM2’ (AM-Two). Outlook on the rating is ‘Stable’.
Franchise value of Al Meezan has grown over time as also reflected in growth in market share (adjusted for investment by associates) of the company to around 11% by end-June 2011, i.e. the second-largest market share in the private sector mutual fund industry. Moreover, penetration in retail segment compares favourably to peers.
In the capacity of an asset manager, the AMC is managing seven collective investment schemes and one pension fund. Schemes having ‘income’ mandate comprise the bulk of total assets under management (AUMs), with Meezan Sovereign Fund alone representing 47% of total AUMs at end-October 2011.
This exposes the company to single product risk. Apart from Meezan Islamic Income Fund where returns have been affected in the on-going year on account of provisioning against non-performing assets, return of MSF has outperformed the benchmark and remained competitive.
In the ‘money market’ category, performance has been consistent and superior to the benchmark. Relative ranking of ‘equity’ funds under management has however, slipped in the peer group in 2011 as the market timing for certain positions held by the fund proved unfavourable. As per management, this is partly attributable to decline in daily average trading volumes in the stock market during the year, translating into lower flexibility in altering scrip allocation, as desired. On a long term basis, Al Meezan has however managed to provide competitive returns. Overall, there is low variability in returns across funds having same mandates stemming from similar nature of exposures.
Senior management team of the institution has remained stable and comprises competent professionals. The fund management and research department have been strengthened. There is however need to build resources on the risk management side. Development of policy framework for investment advisory services is underway while increased marketing efforts are also being deployed in this area which may facilitate the company in increasing its foothold in this business segment.
There is little to no product differentiation in the mutual fund industry in Pakistan, with the bulk of AUMs with most AMCs in the money market category. In addition to product innovation, AMCs could also differentiate on the basis of customer service. Till such time that there is greater depth in capital market and more investment alternatives are available, ability of portfolio managers to manage greater number of asset classes may remain untested.
For more information, contact:
Mr. Javed Callea
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
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