‘Alfalah GHP is one of the best investment opportunities for small investors’

• An interview with Alfalah GHP Investment Management Limited Chief Executive Maheen Rahman

Once, I reached office and found some of my friends waiting for me. They looked very disturbed as some of them had been cheated by a fake investment company and they had lost all their money. They didn’t have any knowledge of investment and had handed over their earnings out of greed to get 4-5 per cent profit per month,” Chief Executive of Alfalah GHP Investment Management Limited Maheen Rahman, recounted an incident about a fraudulent investment company the likes of which used to operate in every city of Pakistan. Dozens of people were being deceived by their closed friends because of their lack of education and knowledge about investment.

“In Pakistan we have a number of safe investment opportunities for small investors like bank deposits, Mutual Funds of private and government companies, Equity/Share Markets and other investment avenues which may give you a small return but at least your original amount will be safe,” the chief executive said.

“Conventional or Islamic Mutual Funds of Alfalah GHP are one of the best investment opportunities for small investors who are looking for better returns on small deposits,” Rahman said in an exclusive interview with Pakistan Today.

“Some of our Mutual Funds have paid returns of up to 28 per cent annually during the last few years and have been declared the best performing funds of the Mutual Funds industry,” she said, and added, “We have hundreds of thousands small investors in our regular and Islamic Funds. People can join these funds with amounts ranging from Rs 500 to millions of rupees and Alfalah GHP can guarantee that your investment will be safe,” Rahman said.

The Mutual Funds industry is growing rapidly in the country because of individual investors.

“The Individual or small investors are participating in these funds instead of going to the equity market directly because we are teaching them about investment plans and advising them about where their money is safe or they can get better returns,” she said.

Mutual Funds industry is working under the Central Depository Company (CDC) and Securities and Exchange Commission of Pakistan (SECP). Small investors only have to open an account in the CDC where they can trade in equity markets or give them transaction rights to use their deposits through different Mutual Funds companies.

Maheen Rahman’s claim to fame has been the high performing Alfalah GHP which has a market share of 5.6 per cent in terms of private sector assets under management (open end funds).

“In October 2013, our total Assets Under Management (AUM) were Rs 10 billion. After two and a half-years we have more than Rs 25 billion of AUM,” she said.

“There has been a growth of 22-25 per cent in the number of investors of Islamic Equity Funds,” she said. “Conventional assets two years ago stood at Rs 9.5 billion. The number has reached now Rs 23 billion.”

“A lot of people think that the stock market is the real money-maker, but any asset management firm should know that careful selection of bond fund should be the main focus. An asset management company typically allocates funds to high, moderate-and low-risk investment avenues based on the individual’s risk tolerance and returns expectations,” she said.

Explaining the reason for her company’s growth in the last few years, Rahman said successful utilization of the fixed income market had made it possible.

“Additionally, key steps that helped boost client assets were investment in products that yield high returns as well as effective distribution methods, especially the various banking channels.”

“We currently have 13 funds including three Shariah compliant funds,” she said adding that people are coming into the fold of Islamic Funds for the last few years due to their fast growth.

“We are launching our third Islamic Fund. Earlier funds were not participating in the stock market, but this new fund will also trade in stocks which crossed 38,700 points level after the inclusion of 28 companies in the MSCI index from May 2017.”

Rahman plans to further boost assets at Alfalah GHP, Pakistan’s eighth-largest money manager, to levels that rival the industry’s biggest firms in the next few years by marketing her funds to individual investors through branches of Bank Alfalah Ltd.

Pakistan has 38 million bank accounts, versus less than 200,000 mutual funds investors, a sign of ample room for growth, according to Rahman. The total size of the Mutual Fund industry is above Rs 500 billion which is around five per cent of the total banks’ deposit, she said. In developed countries, the percentage is usually much higher and is up at around 30-40 per cent, she said.

“We have to grow Pakistan’s Mutual Funds industry like our neighbouring countries.”

She said that India is at 16 per cent with respect to Mutual Funds market compared to the total bank deposits.

“Economy-wise, we are doing well – inflation is low, interest rate is low and investment levels are on the rise, which will definitely boost the country’s economy in future,” she said.

For the last three year, we were trying to create awareness among the investors. Our industry size went up in the last three years but not by as much as we were expecting.

“Now the investment trend has changed and individual investors have started coming towards the Mutual Funds, which is a good sign,” she said.

Earlier, some big fish like the National Investment Trust (NIT), brokerage houses like AKD, Arif Habib, JS brokerage and other institutions were the only ones earning from the mutual fund industry.

‘TAXES ON MUTUAL FUND INDUSTRY ARE TOO HIGH’:

Rahman said the investors of Mutual Funds industry are very disappointed over the issue of government taxes as they are paying over 33 per cent in taxes on dividends, which is the main hurdles in the growth of this industry and people withdraw their savings after seeing these taxes.

“There is fixed tax of 25 per cent on corporate sector investments. But the government is not giving relief to individuals investors.”

“The funds are earning around 20-22 per cent annually from the equity markets and individual investors who allow us to invest in equity market are very happy with their returns. The investors of Islamic Funds are also happy because of the introduction of Islamic products in the equity market which are paying good dividends.”

As many as 27 Pakistani companies have been included in the MSCI Emerging Market index and it is possible that the equity market may touch 40,000-42,000 points level very soon. The PSX is the best performing market among the South Asian countries so far.

The integration of the country’s three stock exchanges into one entity, coupled with more confidence in the economy than before has led many to put their faith in Pakistan’s investment market.

This confidence is shared by Alfalah GHP Investment Management Chief Executive Maheen Rahman, who said conditions are very different from what they were a few years ago.