October 14, 2019 (MLN): Shariah Compliant Money Market Funds yet again delivered remarkable performance during 1QFY20 as each fund exceeded the annual benchmark set by Mutual Funds Association Pakistan (MUFAP). Due to high liquidity, competitive halal returns and maximum possible preservation of capital make money market instruments attractive for investors.
The benchmark set for all these funds is the average of three months deposit rate of three (3) AA rated banks or Islamic windows of conventional banks as selected by MUFAP.
As per MUFAP, these three banks are Sindh Bank, Faysal Bank and Bank of Punjab and the annual average benchmark as per their deposit rates has come out at 5.85%.
A performance chart put together by Mettis Global shows that all the five Islamic money market funds recorded their annual return within a range of 10.8%-12.2%.
Taking the lead, NBP Islamic Money Market Fund gave 12.21% total annual returns as its net asset value (NAV) hopped from Rs.10.02 per share to Rs.10.33 per share.
The fund carries an extremely low-risk profile and has had its fund’s stability rated at ‘AA (f)’ by Pakistan Credit Rating Agency (PACRA), as of December 2018.
Following NBP closely are Al Ameen Islamic Cash Fund and Meezan Rozana Amdani Fund (MEEZANRAF) with annual returns standing at 11.72% for both. AACF’s NAV stood at Rs.100.24 per share at the start of 1QFY20 and rose to Rs.100.32 per share at the end of the 1QFY20. Whereas, MEEZANRAF’s final NAV remained to Rs.50 per share during 1QFY20.
All of these funds’ portfolios mainly consist of cash investments through which they live up to the standard of a typical money market fund which carries low risk and competitive returns.
MEEZANRAF has a more diversified portfolio in which investments are allocated to banks & DFIs, term finance certificates (TFC’s) and commercial papers in addition to cash.
Speaking of payouts, Al Ameen Islamic Cash Fund gave the largest total payout of Rs.2.90 per unit during July-Sept’19, whereas HBL Islamic Money Market Fund paid Rs.2.0 per unit during the 1QFY20.
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