March 24, 2020 (MLN): Money Market Funds remained attractive for investors in February 2020 due to low-risk holding portfolios on the investment spectrum with the goal of earning interest and high scale of liquidity.
In February 2020, the bond market remained volatile as initially yield increased due to the CPI figures of Jan which surprised investors. However, bond markets rallied after the continuous and sharp decline in oil prices coupled with normalized food prices which revitalized investors’ confidence. The yields on average surged by around 10 basis points in the month of February.
The money market funds are best suited for cash management with a short-term investment horizon as they are considered a hedge against shudders of capital market volatility. Due to a pragmatic yet prudent approach, all 21 funds generated positive returns in February 2020.
To compare the performance of funds, they are assessed against an average benchmark rate; 70% 3-month PKRV and 30% 3-month average deposit rates of 3 ‘AA’ rated schedule banks as selected by MUFAP which has been set at 12.72% for February 2020.
On a side note, the three ‘AA’ rated scheduled banks selected by the Mutual Funds Association of Pakistan (MUFAP) are Sindh Bank, Faysal Bank and Bank of Punjab.
According to data records maintained by Mettis Global Private Limited, only two money market mutual funds surpassed the benchmark rate i.e. 12.72% while two funds missed it out by a meager margin.
Lakson Money Market Funds stood on top of the pyramid amongst all other money market funds with an annual return of 13.12% during February 2020, followed by the Pakistan Cash Management Fund with a return of 13.04%.
Islamic Money Market Fund
The stable riba-free returns followed by highly liquid investment in short-term Shariah Compliant securities make Shariah Compliant Money Market Funds a safe choice for investors. All seven funds surpassed the benchmark by a considerable margin set by the Mutual Funds Association Pakistan (MUFAP).
According to the MUFAP, the benchmark for all these funds has come out at 5.52% as per deposit rates of banks; Sindh Bank, Faysal Bank and Bank of Punjab.
A performance chart put together by Mettis Global shows that all the seven Shariah Compliant Money Market Funds recorded their annual return within a range of 11.25%-12.51%.
The top three best performing funds during the month were Faysal Halal Amdani Fund, NBP Islamic Daily Dividend Fund, and HBL Islamic Money Market Fund, as they generated returns of 12.51%, 12.30%, and 11.95% respectively.
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