Fixed Income Funds: An extraordinary performance in extraordinary times!

May 22, 2020 (MLN): The Fixed Income Mutual Funds performed wickedly during the month of April, which was very surprising, to say the least. The decisions taken by the State Bank of Pakistan in the past two months regarding the policy rate, which ultimately led to the interest rates being cut by 5.25%, had shifted the preference of investors from fixed income securities to equity instruments.

However, the impact of this was not reflected in the performance of fixed income funds, as nearly all of them surpassed the benchmark with unbelievable margins. It is pertinent to note that the performance of each fund has been measured against the average return of 6-month Kibor rates for the month, the calculation of which equates to 9.49%. 

According to the data gathered by Mettis Global Link,all income fund mutual funds crossed the benchmark. Pak Oman Government Securities Fund made a clear-cut victory with returns of 71.56%, whereas NBP Government Securities Savings Fund and UBL Income Opportunity Fund followed suit with returns of 48.5% and 48.12% respectively.

As shown in the graph below, six funds generated returns within the 40-49% bracket, eight funds provided returns within the 30-39% bracket while five funds gave returns within the 20-29% bracket.

Shariah Compliant Income Funds

Shariah Compliant Income Funds delivered remarkable risk-adjusted returns during April 2020 by investing in a diversified portfolio consisting of different money market and debt instruments permissible under the Shariah principles.

Except for perhaps four funds, almost all the Shariah Income Funds performed exceptionally as they surpassed the benchmark rate set by the Mutual Funds Association of Pakistan (MUFAP) by a substantial margin. 

For Shariah Income Funds’ performance analysis, a benchmark of 6.57% has been derived after taking the average of 6-month deposit rates of three ‘A’ rated Islamic Banks/Islamic windows of conventional banks, selected by the Mutual Funds Association of Pakistan (MUFAP). These three banks are Al Baraka Bank, Bank of Khyber, and MCB Islamic Bank.

As clearly evident from the graph below, Alhamra Islamic Income Fund, ABL Islamic Income Fund, and Alfalah GHP Islamic Income Fund emerged as the top 3 best performing funds during the month.

Alhamra Islamic Income Fund outperformed the benchmark by 449 bps as it generated an annualized yield of 11.06% against the benchmark of 6.57%. This was followed by ABL Islamic Income Fund and Alfalah GHP Islamic Fund, surpassing benchmark by 345 bps and 326 bps by delivering an annualized return of 10.02% and 9.83% respectively during the month under review.

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Posted on: 2020-05-22T00:07:00+05:00