July 14, 2020 (MLN): An investor, in a series of video releases through his YouTube channel, claimed that he was robbed of his savings after investing Rs3 million in the NBP Nafa Islamic Asset Allocation Fund in 2017 — a fund managed by NBP Funds which is a subsidiary of the National Bank of Pakistan.
The investor further claims that he has lost around Rs1.2m of his total Rs3m investment in the Fund since 2017. The video was later made into a news item based on the investor’s claims.
After reading and reviewing his claims, Mettis Global got in touch with Nafa Funds CEO Dr. Amjad Waheed, who said that investments in mutual funds are subject to market risks which are intimated to buyers before they invest.
“All investors in mutual funds go through a risk profiling process to ascertain their risk suitability, and also at the time of investment sign a declaration that they understand that investments in mutual funds are subject to market risk,” said Dr. Amjad. This is a regulatory requirement of SECP.
“This investor redeemed Rs 840,000 after investing, so his loss is about Rs 360,000 and not Rs 1.2 million”. The loss is due to substantial decline in the stock market during the last three years. He added that “however, a few investors cannot handle the stock market loss, and start blaming and maligning the asset management companies for their losses.”
Moreover, the claims made by the investor of facing sudden losses holds no ground as he has been receiving monthly account statements, and had the option to redeem the entire amount as soon as he incurred some loss.
In addition, mutual funds performance is disseminated through various mediums including the Mutual Funds Association of Pakistan website and monthly fund management reports.
Explaining the PSX trajectory over the course of the last three years, Dr. Amjad said “the stock market index has declined from 53,000 points three years ago to 36,000 points at present. Our stock funds have declined in line with the stock market. Total losses experienced by investors who invested directly in the stock market or indirectly via mutual funds is around Rs3 trillion. This includes about 150,000 investors who invested via stock mutual funds.”
He went on to add that asset management companies manage funds with varying degrees of risk, and investors decide the fund to invest in based on their own risk-return preferences.
Thousands of investors who have invested in stock market mutual funds have experienced a loss due to substantial decline in the stock market over the last three years, resulting from the economic, political and coronavirus reasons.
In conclusion, Dr. Amjad added “Stock funds have given their investors very good returns over a long investment time horizon, however, these funds are risky and volatile in the short term. We expect the stock market to perform well in the future as the number of corona virus cases are on a decline. Also, due to a substantial decline in NSS and bank deposit rates over the last 2-3 months, investors are switching towards the stock market and stock mutual funds.”
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