July 15, 2019 (MLN): Investment in income funds during a phase of high volatility at equity market and unpleasant investment opportunities elsewhere, could be a dicey approach to uptake, one that requires smart tactics along with a hint of luck.
When Pakistan came to face such harsh conditions during fiscal year 2019, only one income fund managed to cross over the benchmark i.e. the annual average of 6-month KIBOR. Due to persistently rising policy rates throughout the year, the KIBOR maintained a steady hike up north.
While the average 6 month KIBOR for the year stands at 10.2%, the performance chart put together by Mettis Global shows that only Dawood Income Fund managed to jump over this benchmark by giving annual returns worth 11.12%.
However, the rest of the funds also gave decent returns with the lowest of them marked at 6.46%.
Dawood Income Fund’s net assets were valued at Rs.80.4 per share on June 30, 2019 as compared to Rs.72.4 recorded at the start of the year.
The open ended fund carries a ‘medium’ risk profile and has been given a stability rating of ‘AA-(f)’ by PACRA.
During first half of the year, most of the fund’s portfolio comprised of T-Bills, TFCs, Commercial Papers and placement with banks and DFI. Through the latter part (December 2018 onwards), the proportion of placement with banks & DFI grew larger and dominated the portfolio.
In addition to this, investors of this fund also recorded the highest dividend gain when compared to the gains earned from the rest of income funds.
As can be seen in the chart, Dawood Income Fund stands tallest with a dividend gain of 18.96%, followed closely by NAFA Financial Sector Income Fund with 14.11% and JS Income Fund with 14.08%.
In FY19, Dawood Income Fund gave a total payout of Rs.16.74 per unit, NAFA Financial Sector Income Fund gave Rs.1.57 per unit while JS Income Fund gave Rs.14.3 per unit.
The maximum total payout was given by Atlas Income Fund which gave returned its investors a sum of Rs.60.5 per unit.
In addition to this, Dawood Income Fund also observed maximum dividend yield at the end of FY19, positioned at 20.82% while JS Income Fund’s dividend yield stood at 14.96%.
In conclusion, all income funds performed decently during the year, but not all of them could beat the average 6-month KIBOR. To be precise, investment in income funds proved to be much riskier that the equity market, and much less riskier than the money market. That being said, the income funds’ performance befits their reputation as the medium risk investment opportunity.
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