July 18, 2019 (MLN): Shariah Compliant Income Funds delivered remarkable results during Fiscal Year 2019 as each one of the 20 funds that completed a full year by end of June 2019, exceeded annual benchmark set by 19 of these funds.
Except for Meezan Sovereign Fund, all funds have established the 6-month average deposit rates of three A rated Islamic Banks/Islamic windows of conventional banks as selected by the Mutual Funds Association of Pakistan (MUFAP), as their benchmark.
As per MUFAP, these three banks are Al-Baraka Bank (Pakistan) Limited, Bank of Khyber and MCB Islamic Bank Limited. The annual average of the monthly 6-month average deposit rate, stood at 3.17% on June 30, 2019.
Having successfully crossed this point of reference, all the shariah compliant income funds recorded total annual returns within the range of 6.3% – 8.85%.
Meezan’s Sovereign Fund’s benchmark is the 6 Months PKISRV Rate, the annual average of which logged in at 7.15%. Unfortunately, the fund fell short of merely 8 basis points from crossing this level.
Taking the lead, NAFA Riba Free Savings Fund gave 8.83% total annual returns as its net asset value (NAV) hopped from Rs.9.37 per share to Rs.10.2 per share. Throughout the year, the fund gave a total payout of Rs.1.4 per share.
It carried a very low risk profile as of December 2018 while its stability had been rated at ‘A(f)’ and asset manager rated at ‘AM1’ (very high quality) by Pakistan Credit Rating Agency (PACRA).
NAFA Riba Free Savings Fund’s portfolio mostly comprises of cash investment while a smaller portion is allocated for investment in commercial papers.
Positioned at the second place amongst top performers is JS Islamic Income Fund with total returns of 8.66% and its final NAV on June 30, 2019 at Rs.101.34 per share.
JS Islamic Fund carried a ‘low-to-medium’ risk profile as on December 2018, while PACRA had rated the fund’s stability at ‘AA-(f). VIS, formerly known as JCR-VIS had rated the fund’s management quality at ‘AM2’.
The fund’s portfolio mainly consists of investment in cash and term finance certificates (TFCs).
Investors of Islamic income funds earned the highest dividend gains from NAFA Riba Free Savings Fund which stood at 13.24% for the year.
Following closed after stands NBP Islamic Savings Fund with annual dividend gains recorded at 12.82%. During the year, the fund gave a total payout of Rs.1.28 per share.
Next comes Alhamra Islamic Income Fund with dividend gains at 12.44% and total payout for the year at Rs.13.2 per share.
Similarly, dividend yield for NAFA Riba Free Savings Funds stands the tallest among all at 13.9%, followed by NBP Islamic Savings Fund at 13.46% and Alhamra Islamic Income Fund at 13.04%.
Categorically, while Islamic Income Funds give out smaller returns due to low to medium risk, investment in these funds proved to be much fortunate for investors when compared to what could have been a disaster had these investors opted for a more volatile investment option in these testy times.
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