In the last three years, a campaign was started by many commercial/investment banks and various other investment institutions offering good returns to small and big investors. At the same time, the new mantra of Islamic bank/investment (riba free) also gained momentum creating a healthy investment environment in the country. In this connection, Mohsin S. Jaffri of The News discussed with Mir Muhammad Ali, Chief Executive Officer, UBL Fund Managers, the workings of funds, future prospects and benefits to small investors.

Q: What is the connection between UBL Bank and UBLFM?

A: 'UBL Fund Managers' is a subsidiary of United Bank Limited, and was established in 2001. The idea was to offer investors to invest in well managed products. UBL Fund Managers offers investment products including mutual funds and fund management services in order to provide a complete one window solution to investors. This company is regulated under the Security Exchange Commission of Pakistan (SECP), whereas the UBL bank is regulated by State Bank of Pakistan (SBP). So this was one of the largest banks to go out and offer value added investment products to customers with small and big investments. The relation is basically the name and capital investment in this company and apart from that UBL Fund Managers is a totally separate company with its own board of directors.

Q: Not many people have clear idea about which investment to go for and how to compare one investment to another? What plans you have in this direction.

A: In the rural areas of Pakistan there is awareness in the markets about investments and mutual funds but outside the cities there is hardly anyone who knows about these options. That is why we have the objective of organizing 'investor's education road shows', where we can go to these areas and explain to the people in simple terms about the simplicity of products and how these people can benefit from it. We also want to tell the people that our people are always there at investment centers to work with those who want to invest and together work out where they should invest. For example if someone's investment needs are suitable for investment in equity, some are scared of losing money, so we advice them to invest in fixed income mutual funds, so that the people don't end up losing money.

So you have to work with an investor to develop an investor profile, and all investors go through this so that we can help them answer important questions like: where to invest, how much to invest and how long to invest?

So that is an area where we want to develop investors trust, and we firmly believe that it is not just about selling a product its about explaining to the investor and the client to develop a portfolio of investment opportunities, and helping the investor in making the right choice.

Here, what we have done is that we have kept a very low minimum investment price, as low as Rs 5,000.00 minimum investment.

We have also introduced one very important thing for our customers with a product called systematic investment plan. We try to inculcate the habit of saving so that people who even have small amounts of money, even someone who is saving 1000 rupee a month, can invest in mutual funds. Although, we are targeting small investors not with the aim of increasing our profits or making money, but we are doing this with the objective of market development, so that more people would know about mutual funds and its benefits, and also with the aim of increasing the habit of savings.

In Pakistan, with a population of over 165 million, we have around 200,000 (two-hundred thousands) investors in mutual funds whereas in India there are 35 million investors.

Q: Do you think your employees are fully trained to explain each and every aspect of the product to the satisfaction of interested investors?

A: I would say that there are very few well trained people in the mutual funds market, and that is a problem that we are stringently addressing. Training is a continuous process, which we are currently going through, but I think the biggest challenge is to get the qualified trainers. I would agree that currently there are some gaps, but we are trying our best to plug those gaps by employing good quality people, and train our current staff to provide services at the highest levels.

Q: What is the criteria for advising prospective customers about your products and amounts to invest.?

A: The first thing we do is we try to understand the mood of investor and then try to find out the need and the liquidity requirement and the constraints that the person faces. Based on all these factors, we come up with a portfolio for that person. We provide the rate of returns of all our funds available in the market to our investors, to help them make their investment decisions. Apart from that we have an up to date website, where our investors can track the performances of our funds, and can also compare the performance with other funds.

Q: I was going through your brochure and if I remember there was description of most of your packages but apart from some info about products the return aspect was not highlighted; any reason for that?

A: It is true that we don't put the average rate of returns and other updated figures on our brochures, because these figures change everyday, and the brochures are normally printed for a longer period of time. That is why we constantly advice our investors to visit our websites or call our centers/helpline and we give them all the required details. Apart from that we send monthly newsletters and performance summary to our customers, so that they would be up to date. We are continuously working on simplifying our literature and providing more information, and we recognize the need to effectively communicate to the masses.

Q: Are there any rules and regulations for your fund managers to follow, and how is their performance gauged?

A: We stringently follow the asset manager code of conduct, which is given by the CFA Institute of USA, where we evaluate the performance and decisions of every fund manager. The Asset Manager Code of Professional Conduct has been formulated by the CFA Centre for Financial Market Integrity and it outlines the ethical and professional standards for providing asset management and investment advisory services to clients. The goal of the Code is to provide a framework for all asset managers to provide services in a fair and professional manner and to adequately disclose key elements of these services to clients. Every fund manager is familiar with the investment policy which clearly says out where to invest and which areas not to invest in, like for example saturated markets and gambling and all those areas are totally off-limits for all our fund managers.

Q: What are the problems that you are facing currently in the investment market and what do you think about the future of mutual funds industry in Pakistan?

A: Well in the short term, I think the transparency issue is there but as I said earlier in the long term the market has given a return of 20 to 25 per cent and well if you compare it with any other market in the world then you will see it is at par with the international markets. In a viable market like the stock exchange I think its very essential for the growth of economy though it also provides alternative revenue for capital raising for long term projects and for capital intensive projects so this is a huge discipline for economy.

Q: How do you see the future of mutual fund industry?

A: The indications of the mutual fund industry are very positive and we can give you the chart of the growth of mutual fund industry in the last 5/6 years. Some 6-years back it was a 20 billion rupees industry right now it is 340bn rupees industry and so you can see that it has witnessed phenomenal growth in the last 6 years of more then 15 times. During the last one year only, the mutual funds industry has grown from 175 billion rupees to 340bn rupees so I think we are on a the right track. All the most prominent banks are coming in this area which is exactly what happened in India some 7-years back when the Indian market was also developing at a similar rate and right now their industry is 5 trillion rupees while our market is around 340bn rupees. So I think the government should encourage the mutual fund industry more and allow all the benefits to mutual fund investors. I feel that in the next 5-years the market will reach around 1 trillion mark and that is no exaggeration.

Q: Are you satisfied with the over all progress? Will you be launching new products in the near future?

A: I honestly think there is a lot of potential in Pakistan. We are working with the UBL bank as well to be a part of its capital guarantee products so that people will have more options and they will get a very decent rate of return. UBL Capital Protected Fund - I (UCPF) will be the first of a series of closed end funds that UBL Fund Managers plans to launch exclusively through the UBL branch network. The fund while providing 100 per cent capital protection, will offer returns linked to the Pakistan equity market. Thus an investor with complete security of capital can also enjoy tax free share market returns. The capital protection feature will be offered to only those investors who remain invested in the fund for the complete term i.e. a 3 year period.

Our first sharia compliant fund, the United Composite Islamic Fund (UCIF) was launched in December 2006, and the current fund size is Rs. 965 million.

Q: We have come to the end of our session; is there anything you want to add?

A: I would really emphasize about the support from the government. The mutual fund sector is really helping small investors and is trying to help the lower income groups to encourage savings and help them learn about investments. I think all the mutual fund companies realize that the future is attached with the retail sector and with the small investors.

What we are trying to do is to get the money from small savers and then bring that money in the system financing projects so ultimately we are like a powerhouse for economic development of Pakistan. If you see from that angle then it is becoming very important in the whole economic cycle so we act as a very important player in the growth and development of this country.