Interview with Managing Director, National Investment Trust
Q. Please share your views about journey of NIT since inception & Milestones achieved.
National Investment Trust Limited (NIT) is the first and the largest Asset Management Company in Pakistan, which was established in 1962 and has completed 55 years of its commendable existence. For decades, it remained the only AMC managing open-end Fund. Though, many other players from the private sector have entered the arena, NIT still remains the largest AMC managing diversified Funds. During this long journey, it has achieved various milestones that include: 1) being the first asset management company of Pakistan, 2) remaining the only open-end mutual fund for nearly three decades, 3) having the largest number of companies in its portfolio, 4) providing support to the market in times of crisis, 5) Launching of ATM cards for its investors, 6) Largest Number of unitholders, 7) Fifty-five years history of consistent dividend payout and 8) successfully managing the stock market support funds launched by the government. NIT has also played a critical role for development of Stock Market, Mutual Fund Industry and the Industrial Sector of the Country. In the unprecedented financial crisis of 2008, NIT played a major role in bringing stability in the market by launching two funds with the support of the Government of Pakistan. These two funds namely, NIT-Equity Market Opportunity Fund (NIT-EMOF) and NIT- State Enterprise Fund (NIT-SEF) greatly helped bringing stability in the market and achieved great success in terms of achieving desired objectives and earning superb returns. This overall success is also evident from an improvement in NITL’s rating from “AM2+” to “AM2++” by PACRA which demonstrates that the Asset Manager meets high investment management industry standards and benchmarks with noted strengths in several of the rating factors.
Q. What products and offerings does your esteemed company offer?
It may be right to say that NIT’s largest investment is in the equity market but today, it offers a suite of products across various asset classes catering the needs of different investors. NIT has a range of Conventional and Shariah Compliant Funds for its investors in the Equity, Income, Money Market and Pension Fund categories. National Investment (Unit) Trust [NI(U)T] is the largest and most diversified Equity Fund in Pakistan with total fund size of more than Rs. 71 billion invested in more than 380 companies. The Fund has consistent history of paying dividends for the last 55 years. NIT – Islamic Equity Fund (NIT-IEF) was launched in 2015 to meet the growing demand of investors interested in investment in Shariah Compliant Equity Securities.
For low risk investors, who desire fixed returns, NIT launched NIT Government Bond Fund (NIT-GBF) and NIT Income Fund (NIT-IF) in FY10. NIT-GBF invests in debt instruments of various tenors issued only by Government of Pakistan, enabling unit holders to invest in government securities through our Fund. Similarly, NIT-IF not only invests in debt securities issued by Government of Pakistan but also takes exposure in debt instruments issued by various corporates.
In the year 2015, NIT also launched NIT Pension Fund (NIT-PF), and NIT Islamic Pension Fund (NIT-IPF) to provide retirement saving schemes for individuals who intend to save for retirement. The investors can make regular contribution to the Pension Funds, while also benefiting from tax rebates available on such investments.
In order to cater the needs of risk averse investors, a money market Fund namely NIT – Government Treasury Fund (NIT-GTF) was launched in 2016 which invests in short tenor securities issued by Government of Pakistan. With the maximum weighted average time to maturity of 90 days, the Fund carries a very low interest rate risk.
In order to meet the growing demand of Shariah Compliant investors, NIT – Islamic Equity Fund (NIT-IEF) was launched in 2015 and subsequently NIT – Islamic Income Fund (NIT-IIF) was launched in 2016. NIT-IIF invests in a diversified portfolio of Shariah Compliant Fixed Income and Money Market Instruments.
Q. What is the market share of National Investment Trust in the Mutual Fund industry?
NIT caters to the needs of about 55,500 unit holders which is the largest investor base in the mutual fund industry of Pakistan. Total net assets under NIT management amount to about Rs. 97 billion, which is about 17% of the aggregate of mutual funds industry of Pakistan as of December 31, 2017. The Conventional Equity Funds under management of NITL (including NIT-SEF and NIT-EMOF) constitute around 56% of the industry’s open-end equity funds whereas the flagship equity fund of NIT, i.e, NI(U)T Fund alone constitutes 48% of the industry’s open ended equity funds. Moreover, conventional fixed income funds of NIT constitute around 15% of the industry’s total open-end fixed income funds respectively. Furthermore, NIT-Islamic Equity Fund (NIT-IEF), a relatively newly launched fund, constitutes around 6% of the industry’s Shariah compliant open ended funds. It should be appreciated that NIT’s enviable market share in the industry has also been made possible by its operational network spread all over the country with 23 branches, 1 centralized Investors’ Facilitation Center in Karachi and a desk at Sarmayakari Markaz, Abbotabad. In addition, there are also various authorized bank branches which facilitate investors.
Q. What has been the market penetration strategy of NIT for its products?
One of the factors that give NIT an edge over its competitors is its ability to reach the retail investors. With the largest investors base of more than 55,500 unit holders, at no stage, it has felt complacent and kept on exploring new avenues for reaching out to investors. NIT continues to take initiatives to create awareness amongst investors and also organizes kiosks at commercially important places in major cities of Pakistan to attract those who have the money and are on a constant search for new investment options, which could offer market driven as well as consistent returns. Furthermore, it is our endeavor to increase our market share through superior performance, improved investor services and by offering a wide range of products. In the future, technology and quality of human resource will play a major role towards the expansion of the mutual fund industry. NIT is taking steps for enhancing its capacity in these two critical areas.
Q. How do you see the Asset Management Industry growing in Pakistan and how has the Government/ Regulator helped develop the sector overall?
There exists an enormous growth potential for mutual funds industry in Pakistan. This is easy to understand when one compares the size of the local mutual funds sector with rest of the world. The total investment in mutual fund industry in Pakistan as percentage of bank deposits is about 5% compared to countries such as India with almost 18% and USA where it hovers around 150% of bank deposits.
Mutual funds mobilize savings for productive purposes; Securities and Exchange Commission of Pakistan (SECP) as Regulator has played a significant role towards the development of the industry through effective regulations to ensure transparency and investor protection. Jamapunji is a good initiative by the SECP to enhance awareness amongst investors and guidance for effective Risk Management. Similarly, Government through fiscal incentive has allowed Tax Credit to individual investors on their investment in Mutual Fund and Voluntary Pension Schemes (VPS) which has provided incentive to investors to invest in Mutual Funds and VPS.
Q. Your results are once again outstanding; how is this sustained year after year?
The highly professional team of NIT, under the guidance of highly qualified and experienced Board, has the expertise to deliver in the toughest of times and ability to prudently manage the investment portfolio, thereby generating good returns for its investors. Historically, NIT has been paying good dividends to its unit holders, even during difficult times. This became possible due to selection of companies enjoying growth potential and regular stream of dividend inflow. The Net Asset Value may have witnessed a few spikes but payouts have been consistent in terms of dividends and total returns have been superior in the longer term. Another key reason for the outstanding performance of NIT has been its investment perspective. It has been following a long-term perspective and abstaining from day trading. This is because NIT basically caters to the needs of small investors who want security of the investment as well as look forward to receiving a regular flow of dividend.
Q. With the new leadership in-charge of NIT, how do you plan to take it to the next level?
NIT is a highly trusted and well respected brand in the domain of investment management in Pakistan. There exists, on the other hand, a huge potential for the growth of mutual fund industry in Pakistan. So, there is an utmost need to make serious efforts with a focused approach to carve out a share of the available potential in commensuration to the brand image of NIT. To achieve the objective of sustainable growth, enhancement in retail base investor; improvement in service quality; development of Human Resource; and launching of new Funds is of paramount importance. The number of funds under NIT management has increased to cater to the needs of diversified investors and, based on future market appetite and investor needs, we will continue to launch new funds in the market. Another aspect of paramount importance is the human resource segment. NIT will continue to invest in its valuable human resource. In fact, it has a very focused approach towards its human resource as it believes that investment in human capital can generate better returns.
Q. Mutual Fund Industry has so far relied on institutional investors, making it rather an Institutional Fund Industry. How long will the industry take to have at least 50% share of retail investors?
I agree with your point of view that mutual funds have so far heavily relied on institutional investors. However, in case of NIUT Fund around 38% investors are individuals whereas balance 62% is represented by institutional investors. Lack of awareness about the benefits of investing through mutual funds is the basic reason for slow growth of retail investors. The more the investor would know about the benefits, the more funds would flow into mutual fund industry. Since, general public is not well aware of functions of mutual Funds they prefer depositing their savings in banks than investing through mutual funds despite the fact that they might be earning negative returns. Furthermore, most of the investors prefer to continue with their existing avenues of investment because either they are risk averse or simply they don’t have time to shift their savings at the higher rate of return with mutual funds. In order to achieve target of at least 50% share of investment by individuals, Mutual Funds would be required to go for aggressive marketing. Though Mutual Fund industry has picked up momentum but in order to create more awareness in general public about benefits of investing through mutual funds and facilitating busy individuals, the marketing force of each & every fund will have to personally approach individuals. There is likelihood that in next five to ten years retail investors surpass institutional investors. I believe that only expanding retail base of investors can provide sustainable growth to the mutual fund industry of Pakistan.
Opening of new branches and increasing retail base would inculcate a saving culture amongst the people in Pakistan where the saving rate is very low.
Q. In the end, what message do you have for your investors as why should they invest in NIT?
NIT has earned a highly respectable and well-known name in the mutual fund industry of Pakistan by demonstrating an unparalleled performance over the past 55 years. Investors have unshakable trust in NIT. Even today with the phenomenally growing competition, when people think of mutual funds or stock market, they instantly think of NIT. The advantage of dealing with an institution of NIT’s magnitude also ensures peace of mind, which has become the rarest of commodities at this time. NIT is the pioneer in the Mutual Fund Industry and its sponsors include Government of Pakistan, leading Financial Institutions and Industrial Groups. NIT has a wide range of product offerings for both Conventional and Shariah conscious investors which include Equity Funds, Money Market Funds, Income Funds and Pension Funds. As mentioned earlier, our flagship Fund NI(U)T has a track record of paying dividends consistently for the last 55 years despite unprecedented ups and downs in the Stock Market. NIT believes in the highest standard of transparency and disclosure and is working continuously towards getting better value for its unitholders, which over the years has built the Trust of Investors in NIT.