Shariah Compliant Income Funds review: HBL wins by a slight margin

August 9, 2019 (MLN): Shariah Income Funds have set the precedence of delivering commendable performance as compared to its counterparts, which was recently witnessed during the month of July. Except for perhaps three funds, almost all the Shariah Income Funds performed exceptionally as they surpassed the benchmark rate by a substantial margin.  

For the purpose of Shariah Income Funds’ analyses, a benchmark of 5.42% has been derived after taking the average of 6-month deposit rates of three ‘A’ rated Islamic Banks/Islamic windows of conventional banks, selected by the Mutual Funds Association of Pakistan (MUFAP). These three banks are Al Baraka Bank, Bank of Khyber and MCB Islamic Bank.

As clearly evident from the graph above, HBL Islamic income fund emerged as the winner with a net yield of 12.19%, after its net asset value (NAV) leapt from Rs. 101.4 per share to Rs. 102.5 per share. As per the data available with Mettis Global, the fund carried a low risk profile and has a Stability Rating of ‘A+(f)’ (VIS) as of 05-Jan-17, and AMC Rating of ‘AM2+’ (VIS) as of 29-Dec-17. Furthermore, it placed most of its investment with banks and DFIs (24.2%), followed by TFCs (4.13%). The remaining investment was held in the form of cash.

NBP Islamic Mahana Amdani Fund (NBP-IMAF) took the second place by declaring a net yield of 12.15%, i.e. only slightly lesser from its predecessor as its NAV inched up from Rs. 10.022 per share to 10.028 per share. More so, it had most of its investment placed with banks & DFI (14.74%), followed by TFCs (3.89%) and Commercial Papers (3.32%). Majority of the investment was held in the form of cash. NBP-IMAF also gave a dividend payout of Rs. 0.0974 per share during the said period.

Apart from NBP-IMAF, two other mutual funds namely NIT Islamic Income Fund and Alhamra Daily Dividend Fund also gave out dividends during the period, amounting to Rs. 0.9122 per share and Rs. 0.9543 per share respectively.

NBP Riba Free Savings Fund (NBP-RSFS) delivered the third best performance with a net yield of 11.36%, as its NAV grew from Rs. 10.2 per share to Rs. 10.3 per share. Having a ‘very low’ risk profile, it has been assigned a rating of ‘A(f)’ by PACRA. Furthermore, NBP-RSFS has invested 14.64% of its funds in banks and DFIs, and 21.11% in Commercial Papers.

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