Educating people about multiple benefits of investing in mutual funds is crucially important
Interview with Mr. Umber Tanya Ansari – Head of Marketing, UBL Fund Managers
Umber Tanya Ansari, have her passion to take initiatives and strategies especially to educate the masses and meet ever-increasing challenges faced by Funds Management industry,
Prior to her responsibility as the Head of Marketing UBL Fund Managers, Umber was Regional Head of Corporate & Institutional Investments, focusing on sales and distribution in the South Region.
Umber joined UBL Funds in 2010 in the Corporate & Institutional Investments Department, growing the corporate business of the company, developing corporate communication material, and handling the entire distribution portfolio, as well as being instrumental in helping the company grow its Separately Managed Account (SMA) portfolio from both the corporate and distribution side.
Umber was of the view that awareness and education on a mass scale about fund management industry is crucially important to grow to its potential in Pakistan, while expressing her views about the industry in an interview.
PAGE: Your opinion about growth of asset management and the marketshare of UBL funds in Pakistan?
Umber Tanya Ansari: “I’ve been in this industry for 8 years now and have had the opportunity to witness steady growth in Pakistan’s mutual funds industry, despite new challenges cropping up every year. Currently, the private sector mutual funds industry offers a variety of investment vehicles such as equity funds, income funds –- including government securities funds, money market funds, and has even branched out into asset allocation funds and fund-of-fund schemes and closed 2015 with overall assets under management of about Rs400 billion.
I believe we have good and capable players in the industry, along with strict ethical practices. But awareness and education on a mass scale is crucial for this industry to grow to its potential, which is actually quite a ways off at present.
Specifically with reference to UBL Funds, we’ve done very well compared to industry performance. In the past 2 years alone, UBL Funds has outpaced private sector asset management industry growth by 46% (Jan 1, 2014 to Dec 31, 2015: Industry Growth: 24%, UBL Funds’ Growth: 70%).
Our assets under management are over Rs60 billion, which makes our market share approximately 15% and there are currently 21 total asset management companies.
We also formally rebranded our Islamic Funds portfolio a couple of years ago, renaming it Al-Ameen Funds –- that itself has posted a growth of 530% in the last three calendar years, which is truly remarkable. Al-Ameen Funds now stands as comprising the second highest market share on a cumulative basis in the Islamic Funds category in Pakistan, showing particularly impressive growth in equity funds. In fact, soaring from Rs5.1 billion to Rs32.5 billion in just 36 months. Al-Ameen Funds served as the major contributor to UBL Funds’ overall growth.
PAGE: Funds are usually offering attractive returns yet the participation of general public investing in funds is comparatively nominal as compared to other countries especially in Gulf countries?
Umber Tanya Ansari: Mutual Funds are highly efficient investment vehicles as they operate on very small profit margins and pass on most of the investment returns to their investors. They also offer a wide range of investment products, as mentioned.
Commercial banks, on the other hand, operate on hefty profit margins and offer only short-term deposits with low profit rates.
Despite the superior role that mutual funds are playing to promote savings in the economy and earn higher returns for investors, the regulatory framework for mutual funds remains less than satisfactory.
Indirect taxes imposed by the Government on the management fee charged by mutual funds are too high. Similarly, the fee charged by our regulator is also higher than international standards. The trustee market has also been effectively monopolized by a single company whose charges are also higher than international standards. So, even for savvy investors, these are real issues that deter them from investing.
But there’s another very major reason that our industry has less investors than other countries, and that’s simply because people don’t really know about mutual funds. There’s a big difference between ‘knowing of’ something and ‘knowing about’ something. Many people may have heard about a thing called ‘mutual funds’, but we haven’t been able to penetrate the masses yet to really leave people informed.
That’s something we are working on and UBL Funds has taken it upon itself in many ways to initiate investor education –- like our suite of videos that you can catch online and our simple Savings Guide, also available for download in both English and Urdu. There’s a lot to be done in this realm, but we look forward to informing people about this investment opportunity that has the potential to seriously pay off. We feel it’s our obligation to let people know that they have this other great option that they don’t even know about yet!
PAGE: Funds contribution in capital market as compared to banks and other leading corporate members?
Umber Tanya Ansari: Like I said, banks definitely don’t offer the kinds of returns that mutual funds have the potential to deliver, but people are still under the impression that their money is ‘safe’ in the bank. Numbers say otherwise. We gathered data from a few different sources, like the SBP, KSE, and Reuters websites, and crunched the numbers.
In the last 15 calendar years, on average, inflation has been 8.5% per year while the 1-year T-Bill rate has been 9.1% – if that’s the 1-year T-Bill rate, then how much do you think a bank is going to give you? In that same timespan, NSS has given 11.1% on average per year and gold has given about 14%. Then you have the stock market –- our KSE-100 Index –- which has given an average annual return over the last 15 calendar years of nearly 23%!
Our industry may be just a fraction of total commercial bank deposit size, but we understand the potential of investing in capital markets to gain returns for our investors that will make a difference to them. In fact, people don’t realize this, but one route for banks to make their depositors money (i.e. to deliver on the savings rates promised to depositors) is by investing in mutual funds –- they use mutual funds as a means to invest in capital markets (along with having their direct investments as well, of course).
PAGE: Please share the kind of funds managed by UBL funds and its future products?
Umber Tanya Ansari: In our Shariah-compliant portfolio — Al-Ameen Funds –- we offer 10 Funds spanning fixed income, money market, asset allocation, equity, voluntary pension scheme and Fund of Funds schemes and, in our Conventional portfolio, we offer 12 different products in the same categories.
We are pioneers in certain types of funds in Pakistan, striving to innovate and come up with solutions to address investor requirements and full exploit the potential of the capital markets. It is truly humbling every time we launch a Fund that is yet unknown in our market and we still get so much support from our investors — it also helps driving industry growth as other industry players then also gain the confidence to follow suit.
We do have some other products in the pipeline and will continue to develop new investment solutions to cater to a variety of investment needs.
PAGE: Don’t you think that there is a need of public awareness campaign to enhance peoples participation rather than institutions in the funds management sector?
Umber Tanya Ansari: We Pakistanis are generally conservative when it comes to saving and investing. 60% of investors have put their money in bank deposits as they feel secure, not realizing that they are taking more risks with regard to rising inflation because the money they may be making in savings accounts is generally less than the returns they would be getting by investing in mutual funds. Bank deposits cannot offer returns to beat inflation and, over the course of time, the money actually loses its worth.
There is an inherent need to educate people regarding the multiple benefits of investing in mutual funds, which are not limited to returns, but also include an opportunity to diversify investments and beat inflation through the power of compounding of mutual fund returns. Mutual funds can also be a great way to save taxes too!
There is a lot of money in Pakistan, but people have little comfort in investing. A unified effort is required by the government and the industry to encourage long term investments via mutual funds to help the industry grow and, more importantly, to help people grow their money.
There is a huge potential market, which still needs to be tapped into. Our entire industry is managing only around 200,000 investors’ accounts, so, in perspective of Pakistan’s population, you may see that there is a dire need to create more awareness amongst the general public. We aim to continue our efforts in educating the masses to share our knowledge and help others gain a more stable and secure financial future.
PAGE: There was a scheme of pension funds, what is the status about pension scheme in UBL funds?
Umber Tanya Ansari: That’s right; Voluntary Pension Schemes, or VPS, are essentially your own personal retirement nest-egg that goes with you wherever you go –- unlike Provident Fund or Gratuity Fund benefits, which are essentially linked to an employer. The great thing about VPS is that an account is opened in an individual’s name, directly, and that individual can contribute to it whenever they want to. The money is locked till retirement (you can take it out early, but you’ll have to pay pretty high taxes on it if you do), so it works as a sort of ‘forced saving’, if you will.
Not to mention that Section 63 of Income Tax Ordinance, 2001 also allows for up to 50% tax credit on investments in VPS (there are, of course, conditions to this). The performance of VPS managed by UBL Funds has been quite impressive and we hope that these will become the investment vehicles of choice for the individual members of Corporate Defined Contribution Plans too.
We offer both Conventional and Shariah-compliant VPS options – UBL Retirement Savings Fund (URSF) and Al-Ameen Islamic Retirement Savings Fund (AIRSF). Both of these have a number of allocation strategies available to select from depending on what stage of life you are in and how much risk you are willing to take. In our more aggressive strategy, both of these Funds beat their peer group averages by approximately 50% over the last three calendar years, while the same result for the moderate allocation strategy in case of both URSF and AIRSF was an approximate 30% out performance.
PAGE: There seems a silver lining about financial sector in pakistan with the arrival of Chinese investment under the flagship of CPEC, how would you describe the outlook of fund management in Pakistan?
Umber Tanya Ansari: The CPEC development is superb for Pakistan as it will position the country, strategically, as a trade hub, which should drive economic growth. Naturally, this makes us even more confident and aggressive on the equity market, especially in the long-term. We also feel this will be a strong driver for foreign investment in the Pakistan Stock Exchange.
There are major local groups that have resumed expansions in anticipation of the project too, and such expansion is very positive for the country’s economy. The government will need to take some drastic measures, though, to ensure we are in a favorable position to ensure CPEC works as a catalyst for this growth.
Profile of UBL fund managers
UBL Fund Managers was incorporated as a wholly-owned subsidiary of United Bank Limited in 2001, and started off as a small asset management company with not more than five employees. Today we stand among the leading asset management companies in Pakistan with presence in the UAE and Qatar, and an employee base of over 350 people.
We have a history of commitment in providing our clients with innovative and world-class investment solutions, along with exceptional advisory and value added services.
In 2010, we successfully implemented Global Investment Performance Standards (GIPS®) for the performance presentation of our funds under management. Pakistan is amongst the 30 countries in the world to adopt GIPS®, and UBL Funds was the first Asset Management Company to achieve GIPS® compliance in the mutual funds industry in Pakistan.
2015, in particular, has been a great year for us, Alhamdulillah.
Our efforts have been recognized in the form of a number of accolades, including the prestigious Corporate Excellence Award by the Management Association of Pakistan in December 2014 — we are the first asset management company to be given this honor. Our commitment to excellence is further reflected in our rating of AM2+ awarded in December 2014, signifying High Management Quality and being the highest rating currently awarded to any asset manager in Pakistan. We are also pleased to be recipients of two Pakistan Software House Association’s (P@SHA) ICT Awards – for Best in Service Innovation in recognition of our first-of-its-kind smartphone app: the UBL Funds Smart Savings App, and CIO of the Year 2015 awarded to our CTO, making us the first AMC in Pakistan to win at these Awards as well.
Thomson Reuters Lipper Awards 2015 named two of our funds winners of 4 categories under the Global Islamic heading to recognize the Funds’ superior performances over specified durations and we have received IPO Market Development Awards in two categories, Maximum Mutual Fund IPOs and Islamic Instrument Initial Public Offerings (IPOs).
None of this would’ve been possible without the immense support of our investors — we strive to bring them the most beneficial products and they continue to support each new launch. It is truly humbling every time we launch a Fund that is yet unknown in our market, and we still get so much support from our investors that other industry players in the industry then also gain the confidence to follow suit.