The only guide you need to understand FMR Report in 2023
A complete guide for investors to understand what an FMR report is and how to read it.
TABLE OF CONTENTS
We look into category-wise best mutual funds in Pakistan in 2022, highlighting the top two mutual funds in Pakistan in each category and InvestKaar’s advice for choosing the best fund for you!
This data has been taken from MUFAP performance page and analyzed further for results.
Let us start!
A year of cash funds!
Who would have thought in Jan 2022 that cash funds would outperform every other mutual fund class? No one would have thought that by the end of the year, we would be in a political Game of Thrones, US treasury yields would be north of 4% (still to go), the rupee would chip off ~40% (250 vs 180), inflation would be 25%+ and we would be talking about default!
Hell of a year!
Mutual funds performance in 2022
In 2022, conventional and Islamic cash funds, also called a money market mutual funds did the best. They were closely followed by the income funds category while all the other categories/types were either flatish or gave negative returns in Pakistan in 2022.
PS. The returns are based on 365 days of performance from 15th Jan 2022 till 15th Jan 2023 taken directly from MUFAP’s website.
Also, all the returns noted below are gross returns which means, the actual after-tax returns are lower. Income tax filers pay less tax but non-income tax filers pay to double the tax rate of filers.
Money Market funds
Conventional money market funds/cash funds return in 2022
On average, the total return from Conventional money market funds/cash funds was 14%.
The best of the lot, according to the MUFAP data was the NBP Money Market Fund with 14.72% returns and the next best was Lakson Money Market Fund with 14.53%.
Islamic money market funds/cash funds return in 2022
On average, the total return from the Islamic money market/cash funds was 13.57%. Usually, Islamic cash fund returns are lower than conventional cash funds but the difference wasn’t big in 2022.
The best from this lot, according to the MUFAP data was Faysal Islamic Cash Fund with 14.2% returns and the next best was HBL Islamic Money Market Fund with 13.95%.
InvestKaar’s advice to conventional or Islamic money market mutual funds investors:
These are the most risk-free funds available to the general public in Pakistan. Money market funds largely follow interest rates announced by the State Bank of Pakistan. Since the beginning of 2023, interest rates have further increased and hence money market mutual funds investors are earning a lot more now vs 2022.
Income Funds
Conventional Income funds return in 2022
On average, the total return from income funds in Pakistan was 12.3%. However, the variation was quite large. For example, the best income fund gave its investor a return of 14.7% while the worst return that an income fund gave was 7.28%.
The best Income fund, according to the MUFAP data was NBP Financial Sector Income Fund with 14.71% returns and the next best was Faysal Financial Sector Opportunity Fund with 14.53%.
Islamic Income funds return in 2022
On average, the total return from Shariah Compliant income funds in Pakistan was 12.38%. However, once again, the variation was quite large. For example, the best income fund gave its investor a return of 14% while the worst return that an income fund gave was 10.28%.
The best Income fund, according to the MUFAP data was HBL Islamic Income Fund with 14.02% returns and the next best was AKD Islamic Income Fund with 13.96%.
InvestKaar’s advice to Income fund investors in Pakistan
Income fund returns depend on the fund manager’s capability to find and invest in the best possible instruments like bonds, term finance certificates etc.
Please read their Fund Manager Report before investing in any income fund to know their exact allocations. Usually, income funds do well when the interest rates have topped or have started to come down. That is usually the best time to choose them.
Stock Funds
Conventional Stock funds return in 2022
Conventional Stock funds or Equity funds had the worst returns when compared to any other type of mutual fund in 2022. NONE of the conventional stock funds gave positive returns which means investors lost their money by investing in stock funds in Pakistan in 2022.
On average, the total return from Conventional Stock funds in Pakistan was -19.6%.
The best conventional stock fund, according to the MUFAP data, was HBL Energy Fund which gave its investors a negative return of 7% and the next best was Lakson Equity Fund with a negative return of 12.33%.
Islamic Stock funds return in 2022
Like Conventional, Islamic Stock funds or Equity funds also had the worst
returns when compared to any other type of mutual fund in 2022.
The best conventional stock fund, according to the MUFAP data, was the NBP Islamic Energy fund which gave its investors a return of 0.56% and the next best was Al Ameen Islamic Energy Fund with a return of 0.08%.
InvestKaar’s advice to Stock Fund investors in Pakistan:
When the stock market is coming down, most of the stock funds will come down and give negative returns to their investors.
No one knows when the stock market will go up, however, usually, stock markets go up when there is economic growth, a lower level of inflation and interest rates. None of the stock funds can perform better in a downward market hence stock selection becomes irrelevant in these conditions that we are in right now.
So when choosing a stock fund, it is preferred that an investor has some basic knowledge about the economic conditions our country is in.
The best mutual fund in 2022 in Pakistan?
The best mutual fund of 2022 was the Meezan Gold Fund which gave its investors a total return of 29% in 2022.
Conclusion:
Yes, it helps to see past performance to take out the best funds, however, future performance can be way different than this. This is the caveat every mutual fund investor in Pakistan should understand.
Now about what we think might happen in 2023!
When economic headwinds are present investors may be better off choosing risk-free investments like money market funds or cash funds.
However, if you investing for the very long term like retirement or children’s education etc, you might want to stick to your investment plan.
If you think 2023 will be the same for Pakistan as 2022 was, with elections, inflation, rupee depreciation, interest rate hikes etc, you might want to take a cue from this report before choosing the right mutual fund type for yourself.
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