Islamic Income Fund Review: NBP and ABL Islamic share the victory stand

October 15, 2019(MLN): The shariah income funds carry on the tradition of performing up to the mark in the first quarter of FY20 as 22 out of 24 funds surpassed the benchmark set by the Mutual Funds Association of Pakistan (MUFAP). These funds provide a steady income to investors with a broadly diversified portfolio of shariah compliant fixed income instruments.

Except for Meezan Sovereign Fund (MEEZANSF) and Al-Ameen Islamic Sovereign Fund (UBLAISF), all funds have established the 6-month average deposit rates of three A rated Islamic Banks/Islamic windows of conventional banks as selected by MUFAP, as their benchmark.

These three banks are Al-Baraka Bank (Pakistan) Limited, Bank of Khyber and MCB Islamic Bank Limited. The annual average benchmark as per their deposit rates has come out at 6.09%.

A performance chart put together by Mettis Global shows that all the shariah compliant income funds recorded their annual return within a range of 3.20% - 12.30% for the first quarter of FY20.

As clearly evident from the graph above, NBP Islamic Mahana Amdani Fund (NBPIMAF) and ABL Islamic Income Fund (ABLIIF) emerged as the winner with a net yield of 12.30%. Whereas, ABLIIF’s NAV leapt from Rs. 10.19 per share to Rs. 10.51 per share.

NBPIMAF’s net value asset (NAV) inched up from Rs. 10.02 per share to Rs. 10.23 per share. As per the data available with Mettis Global, NBP Islamic Fund carries a ‘low’ risk profile and has had its fund’s stability rated at ‘A (f)’ by Pakistan Credit Rating Agency (PACRA), as of April 2019. The portfolio of this fund mainly comprises of cash, TFCs, commercial papers and placement with banks & DFI.

Whereas, ABLIIF’s NAV leapt from Rs. 10.19 per share to Rs. 10.51 per share. The fund has a low risk profile with stability rating of A(f) by VIS Credit Rating Company Limited, as of January 2019. Furthermore, it places most of its investment in cash, followed by TFCs and government backed/guaranteed securities.

Positioned at the second place amongst top performers is Atlas Islamic Income Fund with total returns of 12.18% and its final NAV jumped to Rs.519.39 per share during the 1QFY20. While, PACRA has rated the fund’s stability at ‘AA-(f), as of April 2019.

The fund’s portfolio mainly consists of investment in cash and term finance certificates (TFCs).

The benchmark for MEEZANSF and UBLAISF is the 6 months PKISRV rate which stood at 10.64% quarterly.  The annualized return of both funds for the quarter logged in at 11.20 and 10.79% respectively which crossed the benchmark.

In addition to this, 6 out of the total Islamic income funds offered dividend payouts to investors, with Alhamra Daily Dividend Fund (MCBAHDDF) providing a payout of Rs. 2.98. This was followed by Alfalah GHP Islamic Income Fund (AGHPIIF) and First Habib Islamic Income Fund (FHABIBIIF), which gave a payout of Rs. 2.80 and Rs. 2.00 respectively.

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