Al Huda - International Conference on Islamic Fund and Investment
Islamic Funds for Financial Planning
– Giving best of both worlds
Outline
• Objective of this presentation
• Need for Financial Planning
• How Islamic Funds in the market can help
achieve your Financial Objectives
• Growth in Islamic Funds and Way Forward
Objective
To explain the importance of
Financial Planning and to
illustrate that Islamic Funds
are fully poised to cater to
all financial needs while
strictly abiding with
Shariah Principles
The importance of
Financial Planning
The importance of Financial Planning - Concerns
 Political instability
 Rapid political & economic changes
 Demographic changes
 Businessmen concerns
 Large number of dependents
The importance of Financial Planning

We have a population of almost 190 million people

The population growth rate is approximately 1.5-2% p.a.

The GDP growth rate has been 2-2.5% p.a. over the last 2 years

The unemployment rate amongst the youth is over 7%

The average monthly salary in Pakistan is PKR 7500 (with 35% of the
population below the international poverty line)

The average annual inflation for the last 10 years has been close to
11%
Aren’t these numbers thought provoking enough??
The importance of Financial Planning
We know that money tomorrow is not worth the same as money today.
Consider a fixed monthly expense of PKR 30,000 p.m. today over
time….
Growth of expenses
300000
Pak Rupees
250000
200000
150000
Growth of expenses
100000
50000
0
Today
5 years
10 years
Period
15 years
20 years
What costs PKR 30,000 today will cost over PKR 250,000 in 20 years
Inflation: 11.4% - CPI 2001-10 average
Source: Pakistan Statistical Yearbook 2011, Federal Bureau of Statistics
How to hedge against
these growing expenses?
The importance of Financial Planning
Investments via Financial Planning can help you fight these growing expenses
Inflation: 11.4% - CPI 2001-10 average
Source: Pakistan Statistical Yearbook 2011, Federal Bureau of Statistics
Savings account returns assumed at 6% per annum
Equity Return is the CAGR of KSE 100 for 1991-2011
The importance of Financial Planning
At every stage the consumer is making a choice which is induced by his environment (e.g., friends and
family) and his current lifestyle (job, family size etc) . He makes a decision hoping that it will enrich
his lifestyle
Inflation
Children’s Education





Daughters’ Wedding
Maintenance of standard of
living
Savings for retirement
Savings for Hajj for self & parents
Saving & Investment Needs

Seeking
avenues for
fulfilling
these needs
FINANCIAL PLANNING
VIDEO
Islamic Funds can help achieve your
Financial Objectives
Islamic Funds for your Financial Objectives
According to a survey conducted by
AC Neilson for UBL Fund Managers in 2011,
43% of the surveyed individuals
preferred investing in Islamic Financial
Products while only 23% preferred
Conventional Financial Products
Islamic Funds for your Financial Objectives
• Meeting Short-term & Emergency needs
Cash Funds
• Regular Income
Expenses
to
Low Risk Income Funds
meet
Growing
Islamic Funds for your Financial Objectives
• Growing Wealth Over the Long-term
 Equity Funds and Sukuk Funds
• Planning for your Children’s Higher Education & Marriage
 Children Savings Plans
• Planning for post-retirement years
 Voluntary Pension Schemes
Islamic Funds for your Financial Objectives
Cash Funds (To meet Meet Short-term & Emergency needs)
 There are currently two Islamic Money Market Funds in the industry comprising over PKR 7
billion of AUM
 Money Market Funds invest in low risk and liquid instruments that can help clients meet their
short term needs and enables them to access their money immediately at a time of emergency
Period
Islamic
Funds
Conventional
Funds
1 year rolling
11.5%
12.1%
2 year rolling
10.9%
11.6%
Islamic Funds for your Financial Objectives
Low Risk Income Funds (For Regular Income to meet Growing Expenses)
 There are currently ten low risk Islamic Funds in the industry comprising over PKR 25 billion of
AUM
 Low Risk Income Funds invest in high quality instruments of a medium to long term tenure that
can help clients earn a regular income at an attractive profit rate
Period
Islamic
Funds
Conventional
Funds
1 year rolling
11.6%
12%
2 year rolling
10.2%
10.9%
Islamic Funds for your Financial Objectives
Equity Funds (Growing Wealth Over the Long-term)
 There are currently five Islamic Equity Funds in the industry comprising over PKR 6.5 billion of
AUM
 Islamic Equity Funds invest in equities of Shariah Compliant businesses that earn superior
returns and help clients earn their long-term goals
Period
Islamic
Funds
Conventional
Funds
1 year rolling
6.7%
-4.6%
2 year rolling
29.8%
12.6%
Islamic Funds for your Financial Objectives
Sukuk Funds (Growing Wealth Over the Long-term)
 There are currently four Islamic Sukuk Funds in the industry comprising over PKR 2 billion of
AUM
 Islamic Sukuk Funds invest in Corporate and Government Debt structured in compliance with
the Shariah and can help clients earn high returns in the long-term
Period
Islamic
Funds
Conventional
Funds
1 year rolling
3.9%
4.2%
2 year rolling
6.7%
4%
Islamic Funds for your Financial Objectives
Voluntary Pension Schemes (Planning for post-retirement years)
 There are currently six Islamic Pension Funds in the industry comprising over PKR 1 billion of
AUM
 Islamic Pension Funds comprise of Equity, Debt and Money Market Funds that clients invest in
as per their Risk Profile and save for their retirement while also gaining attractive Tax Benefits
Period
1 year
rolling
2 year
rolling
Islamic
Funds
Conventional
Funds
Equity:
4.0%
-5.5%
Debt:
10.1%
12.1%
Money
Market
9.6%
11.2%
Equity
28.5%
12.5%
Debt:
9.5%
10.5%
Money
Market
8.8%
7.5%
Islamic Funds for your Financial Objectives
Children Savings Plans (Planning for your Children’s Higher Education & Marriage)
 This is a fundamental need that has not been specifically addressed by Islamic Funds
 However, this is an area that is being worked upon and solutions will be available to clients
shortly
Growth in Islamic Funds
&
Way Forward
Overall Growth in Islamic Funds
Assets Under Management
Islamic Funds although a small percentage of overall Islamic Deposits (9%), are growing
as a percentage of Islamic Deposits
Overall Growth in Islamic Funds
Market Share
18.0%
Market Share of Islamic Funds vs. Islamic Deposits
16%
16.0%
14%
14.0%
12.0%
10.0%
8.8%
8.40%
7.20%
8.0%
6.0%
Islamic Funds as a % of Asset
Management Industry
Islamic Deposits as % of Banking
Deposits
5.90%
4.0%
2.0%
0.0%
2009
2010
2011
Islamic Funds constitute 16% of the Total Assets Under Management and the share has
grown significantly over the last 3 years
Way Forward for Islamic Funds
 Islamic Funds are fully poised to cater to all the basic financial needs and Asset Management
Companies are working towards bringing solutions for more specific needs
 Islamic Funds have witnessed commendable growth over the last 3 years and with increasing
inclination towards Shariah Compliant investments the growth will only accelerate
 However, the following areas demand more focus:
 More needs to be done for the marketing of Islamic Funds, a large segment of the
population is not even aware of the options they have for Islamic Investments
 The Investments Solutions needs to be more clearly differentiated from their
conventional counterparts
 The structure and mechanism of Islamic instruments needs to be explained with more
clarity and detail to ensure investor comfort in the instrument’s Shariah Compliance
 We as Islamic Fund Managers are on the right path of growth and with more attention on
the highlighted subjects we will be able to provide clients with the right Investment Solutions
in the most Shariah Compliant manner
Thank you!!