Pakistan Visit Notes
Visit to Karachi
CITY OF LONDON
Investment Management Company Limited
December 2006
Overview of the Sector
Mutual funds were introduced to Pakistan in 1962, via the National
Investment Trust, a state-r un open-end fund. In 1966, the
Investment Corporation of Pakistan was established and launched a
number of closed-end funds.
In 2002, there was a significant development in the closed-end fund
sector with the privatization process of the Investment Corporation of
Pakistan (ICP) initiated by the government. Two private fund management
companies took over the management rights of a number of state-run
mutual funds. This enabled a reorganization of the sector resulting in
the merger of a number of smaller funds to for m larger more liquid
funds. ABAMCO acquired the management rights of 12 ICP Closedend Funds. These wer e reorganized into thr ee closed-end funds,
ABAMCO Capital, ABAMCO Stock Market and ABAMCO Gr owth
Fund. PICIC Asset Management acquir ed the rights to manage 14
funds, which wer e reorganized into PICIC Investment Fund and
PICIC Growth Fund.
In addition to the privatization pr ocess of the ICP, there have been
a number of other closed-end funds launched by the above two
companies and a number of other private fund management
companies. Reorganization in the sector continues.
In 2005, Arif Habib announced plans to open-end the Pakistan
Capital Market Fund. It is understood that the Fund Management
Company decided to do this without pressure from shareholders. The
open-ending was completed by the end of 2005 after r
eceiving
approval from the SECP . This was the first case in Pakistan that
a closed-end fund converted to an open-end Fund. In 2006,
ABAMCO announced the planned merger of the ABAMCO Capital,
ABAMCO Stock Market and ABAMCO Growth Fund into the UTP
Growth Fund.
The three ABAMCO funds mentioned above and the PICIC
Investment Fund and PICIC Growth Fund hold “Frozen Holdings”.
These shares were previously held in the por tfolios of the ICP Funds
and were transferred with the management rights of the funds. These
“frozen shares” can only be sold to strategic buyers through the government of Pakistan. However, if the Pakistan gover nment is able to
sell its stake in the privatization pr ocess, these shar es can be sold as
part of that process. The price is expected to be at a price above that
in the market. The “frozen holdings” are in National Refinery (NRL),
Pakistan State Oil (PSO), and Sui Northern Gas Pipelines (SNGP).
Closed-end Fund Sector
Fund Name
Abamco Capital Fund
Abamco Growth Fund
Abamco Stock Market Fund
BSJS Balanced Fund
UTP Growth Fund
UTP Large Cap Fund
AKD Index Tracker
Golden Arrow Select Stock
Al-Meezan Mutual Fund
Meezan Balanced Fund
Pakistan Premier Fund
Pakistan Strategic Allocation Fund
Asian Stock Fund
Atlas Fund of Funds
First Dawood Mutual Fund
Dominion Stock Fund
First Capital Mutual Fund
Investec Mutual Fund
PICIC Energy Fund
PICIC Growth Fund
PICIC Investment Fund
Prudential Stock Fund
Safeway Mutual Fund
Tri-Star Mutual Fund
Investment Manager
Abamco
Abamco
Abamco
Abamco
Abamco
Abamco
AKD Investment Management
AKD Investment Management
Al-Meezan
Al-Meezan
Arif Habib
Arif Habib
Asia Capital Management
Atlas Asset Management
Dawood Capital
Dominion Financial Services
First Capital Mutual Fund
Investec Securities Ltd
PICIC Asset Management
PICIC Asset Management
PICIC Asset Management
Prudential Fund Management
Safeway Mutual Fund
Tri-Star Mutual Fund
Fund sizes updates as of August 31st, 2006, PKR/USD exchange rate 60.42
UTP Growth Fund was formerly called Abamco Composite Fund
Funds with AUM below USD1million are not tracked.
Disc
N/A
N/A
N/A
32.5
25.2
27.2
13.0
9.3
12.5
18.7
17.5
17.9
N/A
22.2
39.2
N/A
42.0
N/A
22.9
26.9
21.2
N/A
-7.6
N/A
Size USD Millions
Merged into UTP Growth
Merged into UTP Growth
Merged into UTP Growth
USD29.6m
USD92.2m
USD56.6m
USD13.6m
USD16.5m
USD33.9m
USD25.6m
USD42.5m
USD52.9m
USD9.6m
USD8.6m
USD11.0m
Less than USD1m
USD3.3m
Less than USD1m
USD17.0m
USD133.3m
USD91.9m
Less than USD1m
USD1.1m
Less than USD1m
Source: COL Research, Bloomberg.
Regulated by the FSA and registered as an Investment Advisor with the SEC Registered Office: 10 Eastcheap London EC3M 1LX
2
PICIC Investment Management
in NRL as the gover nment did not sell of f its entir e stake in the
company, so the sale of the shar es were pro-rated back. The position
Meeting with Syed Abid Raza (SAR), Chief Executive
in SNGP is small in both funds, but a sale of PSO could add
Khurram Shehzad (KS), VP & Head of Resear ch
significant value. However, the sale of PSO has been talked about for
Closed-end Funds Managed:
a long time.
• PICIC Energy Fund (PEF PA)
The asset allocation of both funds is deter mined by an investment
• PICIC Growth Fund (PGF PA)
committee, comprised of the CEO, 3 Equity Fund Managers and
• PICIC Investment Fund (PIF PA)
Head of Research. The funds both have core investment portfolios of
At the time of the meeting PICIC Investment Management wer e in
approximately 60%, with the remainder used for trading. Cash is used
the process of launching the PICIC Ener gy Fund. SAR expected the
at times when risk of a correction is perceived. At the time of the visit
size of the fund to be appr oximately USD16 million at launch. The
PIF was holding approximately 10% cash. The CEO does also look at
target market for the fund was both individuals and corporate clients.
technical charts as he has 18 years experience of trading.
This was the first energy fund in Pakistan and was also the first sector
Research is done both in house and with br
specific fund. In addition to the 3 closed-end funds, PICIC ar
research team often holds conversation over the phone with companies.
e
oker research. The
managing two open-end funds (one equity fund and one debt fund).
Corporate governance at companies is taken into account and SAR
We discussed the discounts that the funds were trading on. At the date
says that transpar ency in Pakistan in impr oving. There were three
of the meeting, PIF was trading on an appr oximate discount of 19%
equity analysts working with the company.
and PGF 11%. PIF generally traded in the discount range fr om 18%
I discussed the 1 for 2 rights issue of PGF , stating that a rights issue
to 28%, whilst the discount range of PGF was generally nar rower in
should not be held while the fund was trading on a discount. I stated
the low to high teens. W
that in order to prevent NAV dilution, the rights issue should be done
e discussed the r ecent open-ending of
Pakistan Capital Market Fund. Whilst SAR believed this pr
ovided
at NAV or a premium. However, I did not get agr eement from SAR.
some comfort to the market r egarding discounts, he would not
There seemed to be two reasons for the rights issue, firstly to grow the
comment on whether PICIC was willing to open-end any of their
assets under management and secondly to r educe the weight of PSO
managed closed-end funds.
in the por tfolio. Since the rights issue, the discount of PGF has
SAR’s response to r educing the discounts was to continue paying
widened out quite significantly.
large dividends. Whilst investors in Pakistan seem to be inter ested in
receiving large dividends, I thought this would only temporarily reduce
Conclusion
discounts. The company aims to pay dividends on a quar terly basis.
PIF PA does present opportunities to gain exposure to Pakistan, with
As mentioned in the intr oduction, two PICIC funds hold “fr ozen
the addition of a possible NAV uplift if PSO is privatized at a premium
holdings” as shown below.
to the market. My understanding fr om the CEO is that ther e are no
intentions of holding a rights issue for PIF , however this will need to
Fund
PSO
SNGP
be watched carefully. PGF PA has performed worse than PIF PA and
No of Shares
% of NAV
No of Shares
% of NAV
PGF PA
9,997,584
33.3%
7,801,060
8.2%
PIF PA
3,737,730
20.4%
1,958,304
3.3%
Frozen Holdings as of March 31st, source company reports
There is a possibility that the holdings in PSO and SNGP could be
sold during the government’s privatization program at a premium to
the market price. In 2005, the gover nment sold par t of its stake in
NRL at a 52% pr emium to the market price, which gave a significant
uplift to the NAVs of both funds. Both funds still hold a small position
the rights issue caused the discount to widen fur
ther. Given th e
“frozen holdings” in each fund, I would imagine this would make it
less likely for restructuring into open-end funds until the holdings are
privatized by the gover nment. Size is my main concer n with the
PICIC Energy Fund. I would not be surprised if the fund manager
tried to hold a rights issue to increase the fund’s size. This would have
the consequences of widening its discount fur ther.
3
Atlas Asset Management
Conclusion
Meeting with Ather Husain Medina, Chief Operating Of ficer
At approximately USD9 million in size, the closed-end fund is r eally
Closed-end Funds Managed:
too small and illiquid to be consider
ed as a potential investment.
Whilst the fund does trade on large discounts, this is mainly as a result
• Atlas Fund of Funds (ATFF PA)
of its illiquidity. Further, I felt that the fund manager was not taking
Atlas Asset Management, which is only ar ound 2 years old, is smaller
full advantage of some of the discounts on of
than a number of the more established asset management companies.
closed-end sector. The tracking error with the KSE was too large and
They manage one closed-end fund and two open-end funds. They
in a rising market would result in significant underperformance.
fer in the Pakistan
were also planning to launch another open-end equity fund. The
closed-end fund is a fund of funds appr
oach investing in Pakistan
closed-end funds, open-end funds and money market instr uments.
The fund management company is af
filiated to a manufacturing
company and found distribution of its pr
oducts difficult. This
problem was partly resolved by the acquisition of a commercial bank.
The company has a technical assistance agr eement with ING. ING
help with the training of staf
f, product development and have a
representative on the Boar d. Employees ar e often sent overseas to
ING for training.
Al Meezan Investment Management
Meeting with Mohammad Shoaib (MS), Chief Executive
Muhammad Asad (MA), VP & Head of Investments
Sohail Yaqoob (SY), SVP & Head of Marketing
Closed-end Funds Managed:
• Al-Meezan Mutual Fund
• Meezan Balanced Fund
Al-Meezan was established in 1995 and has a track record of 11 years.
ficult to hir e experienced
In addition to the two closed-end funds, they cur rently manage the
personal as the Asset Management Industr y in Pakistan is still quite
open-end Meezan Islamic Fund. At the time of the visit, total AUM
young and with new companies expected to enter the industr
was PKR7.2 billion (USD120 million). The oldest fund, Al-Meezan
As a new company they have found it dif
y the
problem is expected to be exacerbated. The company had 40
Mutual Fund, was launched in 1996 with the cooperation of Jar dine
employees, with 3 fund managers, 5 in r esearch, a CEO and COO.
Fleming Asset Management. The company is 65% owned by the
I was surprised when looking at the fund that they did not have a
higher weighting to closed-end funds, considering the large discounts
Meezan Bank. All their funds ar e shariah compliant and ther efore do
not invest in the tobacco and banking sectors.
that they were trading on. At the end of December 2005, the weight
The three investment pr ofessionals at the meeting gave a good
to closed end funds was approximately 40% of the portfolio. The fund
presentation on their funds and company. They have implemented the
was described has being mor e concerned with absolute r eturns than
CFA code of conduct and appear to manage their pr
relatively returns. They had a position in the Abamco Composite
professional manner. MS is actually the head of the Pakistan CFA society.
Fund (later r enamed to UTP Lar ge Cap Fund), as they thr ough it
The Al-Meezan Mutual Fund had posted an average annual r eturn of
would open-end at some point in time. Accor ding to Atlas, the fund
24.49% since inception in PKR and a total r eturn of 544.99%, and
had an agr eement with the IFC which helped launch the Abamco
according to the managers posting out per formance against the KSE
Composite Fund.
every year except 2002 and 2004. One of the r easons for the under
I was told that Atlas did not invest in the closed-end funds at launch
performance in 2004 was due to a rights issue. Again, this was
on expectations that the funds would begin trading on a discount.
dilutive as it was under taken at a discount to NAV. The performance
Asset allocation is determined by an investment committee comprising
record is quite impressive considering that they ar e not able to invest
of three members. All thr ee funds wer e described as having low
in certain sectors such as banking. In par
turnover.
maintain good performance in 2005 despite not being invested in the
out performing banking sector.
oducts in a
ticular, they managed to
4
The Meezan Islamic Fund (O/E) was launched in 2003 with an
year ago in or der to r esolve the discount issue and also to tr y and
initial size of PKR520 million (USD8.6 million). The fund is allowed
increase AUM. At the time the decision was made, the fund was
up to 15% of NA V in one company (closed-end funds 10%) and a
trading on a 45% discount to NAV. The managers felt they needed to
maximum of 50% in cash. Accor ding to the managers, ther e were
win back investor confidence and help r educe discounts in the sector.
approximately 43 onshor e Mutual Funds, of which 22 wer e open-
Although there were redemptions following the open-ending, ther e
end. Total AUM for the industr y was approximately PKR153 billion
were also some new flows into the fund. Their other funds ar
(USD2.5 billion), split between closed-end and open-end funds in the
expected to change str ucture in the immediate futur e. One of the
amounts of PKR45 billion (USD745 million) and PKR108 billion
reasons cited by NB was because they wer
(USD1.8 billion), respectively. Islamic funds account for 5% of total
discounts. However, NB did say that they wer
AUM in Pakistan and Al-Meezan account for 90% of the total Islamic
regulator regarding the possibility of allo wing share buy backs in the
funds industry.
sector. However, it would dep end upon the size of the fund. Some
Asset allocation is determined by a four member team of senior fund
funds would be too small to consider buy backs as a solution to erduce
e not
e trading on nar rower
e talking with the
managers and r esearch analysts. They describe their investment
the discount.
methodology as based on fundamentals, looking at both gr owth and
Currently, in addition to the above, the managers ar
income stocks. They aim to pr ovide a stable dividend payout.
launching an Islamic Fund. They would also like to convince the
e considering
regulator to allow them to invest up to 30% outside of Pakistan. At the
Conclusion
time of the visit total AUM was appr
The Al-Meezan Mutual Fund appears to be a well managed fund.
oximately PKR17 billon
(USD282 million) with a mixtur e of both institutional and r etail
Performance against the KSE is good over the long-run despite being
investors.
unable to invest in cer tain sectors. The balanced fund would not be
According to the managers, in the 1990s ther e was a lot of capital
appropriate for most COL funds as the tracking er
flight from Pakistan, however post 911 there has been a lot of money
ror against the
benchmark will be too large due to its investment in bonds. The rights
flowing back into Pakistan and the outflows have stopped. Ther e is
issue at a discount in 2004 is a concer
more interest from the GCC countries. In addition to equities, GCC
n, however the managers
seemed to agr ee that it would not be in the best inter
shareholders to hold any fur
ests of
ther rights issues at a discount. A
comment that several managers have made during the visit.
Arif Habib Investment Management
investors are looking at other asset classes in Pakistan.
The fund managers wer e quite cautious and incr eased the cash levels
across all their managed funds. Pakistan Pr emier Fund was holding
approximately 30% in cash, while the Strategic Allocation Fund was
only 40% invested in equity . The Pakistan Strategic Allocation Fund
Meeting with Nasim Beg (NB), Chief Executive
tends to take very aggressive asset allocation bets depending upon the
Aaliya K. Dossa (AKD), VP Equity Funds
managers’ views on stock market valuations and technical factors.
Basharat Ullah, SVP & Head of Resear ch
In Pakistan, with the impr oving economy, companies in the textile,
Closed-end Funds Managed:
automobile and cement sectors have been adding to pr
• Pakistan Premier Fund
• Pakistan Strategic Allocation Fund
The asset management company was set up 4 years ago. The
company currently has 6 funds, comprised of two closed-end funds
and four open-end funds. Inter estingly, one of the open-end funds,
the Pakistan Capital Market Fund was conver ted from a closed-end
fund into an open-end fund. This was the first example of a Pakistan
Closed-end Fund conver ting from a closed-end into an open-end
fund. The managers chose to r estructure the fund approximately one
oduction
capacity. Due to improved liquidity conditions, companies are able to
borrow from banks cheaply. The fund managers also expected some
companies to begin coming forward with rights issues to raise capital.
The service sector represented on the stock market is mainly r estricted
to the banks, whilst the oil & gas sector represents approximately 30%.
The banks ar e expected to continue to see str
ong profit growth,
despite a lowering of interest rate spreads. The cement sector had seen
some large capacity increases and company valuations were starting to
look quite expensive. The paper sector was still seeing a quite
favorable supply and demand situation.
5
The asset allocations are decided on a committee basis comprising of
However, one of the biggest issues for this fund is the size. The fund
the fund managers, the CEO and Head of Resear
is well diversified and the managers attribute the lower discount/
ch. There are 8
analysts meeting with companies and looking at fundamental
premium to the fund’s good per formance.
valuations. All valuations ar e done in house and they don’t r ely on
The managers said that it was unlikely that they would consider
outside broker research. They currently have 2 equity fund managers
and 1 debt fund manager . Staff turnover was described as low with
employees owning 20% of the company.
launching any mor e closed-end funds and would favor open-end
funds. I got the feeling that they did not like the funds trading on a
discount following launch and the inability to gr
ow the size of a
closed-end fund.
Conclusion
The fund mangers gave a good account of themselves. The decision
to open-end Pakistan Capital Market Fund to r esolve the discount
appears to have been the right move. Whilst the Pakistan Strategic
Allocation Fund has a good performance record, concerns remain over
its aggressive allocation bets, which could result in underperformance
in a rising market.
The asset allocation of their active funds is deter mined by the fund
managers. At the time of the visit, the fund managers wer e holding
approximately 20% in cash in the Golden Ar
row Fund. They wer e
concerned about the r ecent market volatility and had taken some
profits in some of the holdings.
The managers wer e planning to hold a rights issue in the Golden
Arrow Fund to increase the size of the fund from PKR850 million by
AKD Investment Management
around PKR250 million so that the fund r eached a r easonable size.
Meeting with Faisal G. Bengali (FGB), Chief Executive
Sadiq Hussain (SH), CIO
The rights issue would incr ease the size of the cash level and the
managers would look for good value oppor tunities before investing.
The investment methodology was described as bottom up but
Ali Alvi (AA), Senior Investment Analyst
benchmark aware. They had par tly reduced their holdings in the
Imran Motiwala (IM), Head of Operations
banks to take profits after the sectors out performance. They were still
Closed-end Funds Managed:
looking at investing in stocks exposed to the domestic economy. They
used broker research as well as in house r esearch.
• Golden Arrow Select Stock Fund
• AKD Index Tracker Fund
AKD Securities is the lar gest brokerage house in Pakistan and owns
Conclusion
100% of the shar es of AKD Investment Management. The company
Another interesting meeting, with a competent team of fund managers
manages two closed-end funds and was in the process of launching an
and research. Main concer n regards the size of the funds and the
open-end equity fund.
possibility of further rights issues to increase the size of Golden Arrow.
The AKD Index tracker was launched at the end of 2005 with the
objective of tracking the KSE 100 index. The idea behind the fund
was to launch a transpar ent index tracker . However, one of the
problems that this fund faced was an incr ease in the discount to NAV
since launch to around 16%. Accordingly, any investors subscribing to
the fund at launch would have underper formed the benchmark by
16% despite the close tracking per formance of the underlying assets.
The index tracking fund has a lower management fee of 0.75 basis
points. As the index has significant concentration in the top holdings,
the bottom of the index is left out.
The Golden Arrow Select Stock Fund on the other hand has posted
very good per formance and has traded at a pr
emium to NA V.
However, it was less likely that the managers would hold rights issues
if the fund began trading on a wide discount and since the rights issue
completed in mid February the fund has begun trading on a discount.
The Index tracker seemed to of fer interesting opportunities as this
would track the index, coupled with the potential of out performance
if the discount narrowed. I felt that the managers, and possibly some
of the shareholders were disappointed with the price under performance.
However, as with the Golden Ar row Fund, the main issue with the
Tracker regards liquidity and fund size.
6
ABAMCO Limited
Composite Fund also changed its name to the UTP Lar ge Cap Fund
and at the same time amended its tr
Meeting with Najim Ali (NA), Chief Executive
ust deed to incorporate at
continuation vote in September 2009. I understand that this may have
Closed-end Funds Managed:
been as a r esult of pr essure from one of the fund’s lar
gest
• ABAMCO Capital Fund
shareholders (refer to Atlas meeting).
• ABAMOC Composite Fund
NA said that he was now Chair man of the Mutual Fund Association
• ABAMCO Stock Market Fund
of Pakistan. They wer e looking at methods of helping r
• ABAMCO Growth Fund
discounts such as allowing shar e buy backs and the possibility of
• BSJS Balanced Fund
tender offers. This is something that was discussed within the context
educe
ABAMCO is the lar gest and oldest Fund Management Company in
of the merger of the ABAMCO funds. NA said that if the discount on
the private sector with its license dating back to 1995. T otal AUM at
the merged fund was consider ed too wide, then they would look to
the time of the meeting was appr oximately PKR27 billion (USD448
try and implement a tender offer. NA also said that as Chairman of the
million). They wer e managing 5 closed-end funds and 5 open-end
Mutual Fund Association he was looking to tr y and pr event rights
funds. However, the number of closed-end funds was to be r educed
issues taking place at discounts to NAV due to the dilution impact on
after the planned mer ger of ABAMCO Capital, ABAMCO Stock
shareholders. He admitted that in the past ABAMCO had made the
Market and ABAMCO Growth Fund into one single closed-end fund
mistake of under taking rights issues at NA V and this had r esulted in
to be named UTP Gr owth Fund. At the date of the meeting the
significant discount widening.
merger had alr eady been announced and they wer e waiting for final
The company had just launched a fund of funds (UPT
regulatory approval before a shareholder vote could be undertaken to
Funds) to take advantage of the wide discounts available in the closed-
approve the merger. The merger was being under taken at the of ficial
end fund sector. The fund was limited to 50% that it could invest in
NAVs for 31st December 2005. ABAMCO was also naming its new
its own funds. At the time of the meeting, this had invested
funds using the name UTP to unify the brand names of their
approximately 20% of its NAV in ABAMCO managed funds. This was
products. The idea behind the mer ger was to cr eate a fund with
an interesting development and is expected to help keep the
greater market liquidity, which is expected to r educe the discount at
closed-end funds from trading on wider discounts. The fund is able to
which the funds wer e trading. They believed that ther e was evidence
invest in both open-end and closed-end funds and was between 90%
of price manipulation due to the smaller sizes of some of their funds.
and 95% invested at the time of the meeting.
One negative following the mer ger of the funds was that a discount
The three Abamco funds that wer e undertaking the merger also had
“frozen holdings” in the companies as shown below:
narrowing clause in the fund documentation was being removed. The
three funds pr eviously stated in their pr ospectus that if the shar e
certificates traded at one-thir d below their NA V for a consecutive
period of one year or for fifteen months out of the previous two years,
then the tr ust deed would be ter minated. NA stated that the r eason
for this being removed is that they thought it was unfair that only the
ABAMCO funds had such a clause, while none of the other closedend funds had a similar clause. The clause had initially been inser ted
on the understanding that other closed-end funds would have a
similar clause. I ar gued that it was not in the best inter
ests of
shareholders to r emove the clause and just because other managers
did not have discount narrowing measures that managers that do have
these should remove theirs. I stated it would be better to encourage
other managers to intr oduce these. Inter estingly, the ABAMCO
Fund
PSO
No of shares
- Fund of
SNGP
% of NAV
No of shares
% of NAV
ACF PA
1503198
20.9
1239718
1.2
ASMF PA
900200
23.9
700000
5.9
AGF PA
1002081
44.1
200000
2.8
As at 31st March 2006, source company reports
The position in SNGP is small in the funds, but again a sale of PSO could add significant value.
7
NA was quite positive about the market outlook with economic
The fund has a “rigorous” investment process including an investment
growth of 7% expected in 2006 and strong earnings growth expected.
committee with three members. The fund is actively managed investing
Earnings growth of approximately 27% was forecast for 2006. NA did
in stocks using fundamental valuation techniques. Price momentum
not expect any major issues over the next 3 years and expected the
analysis is used to assist with timing buying and selling levels. A
government to continue to focus on privatization.
bottom up value driven approach is adopted investing in high quality
The Investment pr ocess is overseen by an investment committee
companies.
including the CEO and two boar d members. The CIO pr esents his
The managers were quite bullish on the local economy with gr owth
strategy for the funds to the committee. The plan for the week is
expected to achieve 6% to 8% over the next few years. They did expect
submitted to the committee for appr oval each Monday. Meanwhile,
to see some currency weakness of around 2% to 3% in the near future,
the performance of the funds is monitor ed on a daily basis. The
with the trade deficit incr easing. Inflation was for ecast at around the
Investment Committee also determines the cash level.
5% to 8% range. They expect to see strong earnings growth. They also
expected to see a strengthening in the relationship with the Middle East.
Conclusion
At the end of January the fund had an allocation of 28% to banks, 24%
NA appeared to say the right things during the meeting r
egarding
to the oil & gas sector and 10% to both cement and oil & gas
discounts and measures to implement to cor rect these. However, the
marketing. There was also a 6% allocation to fer tilizer and 5% to the
decision to r emove the discount clause fr om the pr ospectus of the
refinery sector. The por tfolio held appr oximately 50 stocks with an
merging funds was disappointing. The mer ged fund will be better
average position size of 2%.
from a trading perspective as it should be mor e liquid. The mer ger
As of January end 2006, the per formance of the fund since inception
also allows the “frozen holdings” to be spread more evenly across the
in October was in line with the MSCI Pakistan, but underper forming
funds. Before the merger, the holding in PSO on ABAMCO Gr owth
the KSE100 index.
Fund was too high from a diversification standpoint.
Conclusion
BMA Asset Management
BMA appears to have a good investment team in place, but the time
Meeting with Muddasser M. Malik, Chief Executive
period is too shor t to make any r ealistic performance evaluations at
Syed Mohammed Ali Raza, Senior V ice President
the moment. The fund is open-end and ther
Rukhsana Narejo, Senior Associate
opportunities in the closed-end fund sector at this stage given the
Syed Khurram Jan, Senior Associate
discounts that they are trading on.
Sarah Ali Khan, Senior associate – Fund Management
Anwar Zafar, Fund Management
Chris Weaver
Adeel Ahmad Khan, Manager – Accounts
A meeting was held at the of fices of BMA Asset Management to
research their r ecently launched Pakistan Oppor tunities Fund. The
fund, which was launched in October 2005, is the first ever open-end
US dollar denominated of fshore equity fund to be established for
Pakistan. The fund has a primarily long strategy, although it is able to
take short positions. The fund is aimed at institutional investors
residing outside of Pakistan. At the end of Januar
y the fund was
approximately USD32.1 million in size. Unlike the domestic funds
which only have management fees, this fund is similar in fee str ucture
to offshore hedge funds with a per formance fee above a 10% p.a.
hurdle rate. In addition to BMA, the fund also has an offshore advisor,
Tethys Advisors in the UK.
e are probably better
CITY OF LONDON
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