August 7, 2019 (MLN): Living up to its reputation of being one of the least dicey investment avenues available, Pakistan’s money market funds, while defying all the crumbling economic tension in their surroundings, exhibited an excellent performance in July 2019.
The chart below shows it as clearly as possible, but just to spell out a few important points, we see that all the 21 funds recorded positive returns on their respective Net Asset Values (NAV)’s and almost half of them observed over 12% returns during the month.
For the sake of comparison, we have an average benchmark rate against which these funds’ performances are evaluated. This market’s benchmark is a weighted average of 3m PKRV rates and the average of 3 month deposit rate of 3 “AA” rated scheduled banks selected by Mutual Funds Association of Pakistan, more commonly known as MUFAP.
Here is a little background about the benchmark selected; PKRV rate or Pakistan Revaluation Rate has been defined by the State Bank of Pakistan as an average of the yield-to-maturity on government securities traded in the secondary market and determined at the end of day.
The yield-to-maturity on government securities is quoted by the six brokerage houses keeping in view the yield-to-maturity on government securities traded in the secondary market. These brokers are selected by Financial Market Association of Pakistan.
On the other hand, the three “AA” rated scheduled banks selected by MUFAP are Sindh Bank, Faysal Bank and Bank of Punjab.
70% of the benchmark comprises of the average 3m PKRV rate for the month while the remaining 30% accounts for the 3 month average deposit rate of the aforementioned scheduled banks. As per our calculations, the average benchmark for July stands at 12%.
Resultantly, the performance chart shows that 9 money market funds exceeded the benchmark performance and amongst these, Atlas Money Market Fund stands on top of the pyramid with 12.42% returns on NAV.
This “low” risk profiled fund’s NAV hopped from Rs.498.9 per share to Rs.504.2 per share and it gave a dividend payout worth Rs.4.25 per share in July. The fund’s Asset Manager has been rated at “AM2+” by PACRA.
Atlas’s portfolio is mainly comprised of cash and Treasury bill investments, as per data on Mettis Global.
Positioned next with 12.38% returns on its NAV is JS Cash Fund whose NAV went up from Rs.101.6 per share to Rs.102.7 per share. The extremely low profiled fund however made no dividend payments during the month.
Having missed the second position by a fraction stands NBP Money Market Fund with 12.37% return on its NAV which went from Rs.9.77 per share to Rs.9.87 per share.
Amongst the companies that did give out dividends in July, NIT Money Market Fund has secured the highest rank in both dividend yields and dividend gains, with Askari Sovereign Cash Fund second in line.
In terms of performance and NAV returns, Askari comes much later with 12.04% returns on NAV.
Conclusively, the fund’s overall conduct during the month is a breath of fresh air in these difficult times. However, given that a money market fund typically invests in highly liquid instruments with short term maturity, and carried low level of risk, this kind of a margin for their performance in granted as normal.
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