What are Mutual Funds?
Mutual Fund is a collective investment scheme, which specializes in investing a pool of money collected from investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets
How Does a Mutual Fund Operate and Regulated?
Mutual Funds are operated by Asset Management Companies (AMCs) which exists in the form of a public company registered under Companies Act 2017. The AMC launches new funds through the establishment of a Trust Deed, entered between the Asset Management Company and the Trustee, with due approval from the SECP under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the “Rules”). The Trustee performs the functions of the custodian of the assets of the Fund. The trustee ensures that the Fund Manager takes the investment decisions within the defined investment policy of the mutual fund. Under Pakistan law, banks and central depository companies, approved by the SECP, can act as trustee. At present Central Depository Company of Pakistan (CDC) acts as a Trustee of most of the funds of the industry.
The Securities & Exchange Commission of Pakistan (SECP) is the regulator of mutual funds industry and is very stringent in issuing licenses to fund management companies, especially in the case of Collective Investment Scheme (CIS). The SECP also carries out continuous monitoring of mutual funds through reports that the mutual funds have to file with the SECP on a regular basis. In addition, SECP conducts on-site inspections of the AMCs.
Benefits of investing in Mutual Funds? Or Why You Should Invest in Mutual Fund?
Mutual funds make saving and investing simple, accessible, and affordable. The advantages of Mutual Funds include the following:-
Mutual Funds units are easy to buy.
Mutual Fund unit holders can convert their units into cash on any working day. They will promptly receive the current value of their investment. Investors do not have to find a buyer; the fund buys back (redeems) the units.
By investing the pool of unit holders’ money across number of securities, a mutual fund diversifies its holdings. A diversified portfolio reduces the investors’ risk. It would be difficult for an average investor to buy varied securities to achieve the same level of diversification as is available with investment in mutual fund.
– Professional Management
The Asset Management Company evaluates all opportunities that arise in the market, carefully examines them and then takes an informed decision for investment. Whereas it is not an easy task for an individual and even for corporate company if investing is not their core business.–
What are Different type of funds?
These are mutual funds which continually create new units or redeem issued units on demand. They are also called Unit Trusts. The Unit holders buy the Units of the fund or may redeem them on a continuous basis at the prevailing Net Asset Value (NAV). These units can be purchased and redeemed through Management Company which announces offer and redemption prices daily.
These funds have a fixed number of shares like a public company and are floated through an IPO. Once issued, they can be bought and sold at the market rates in secondary market (Stock Exchange). The market rate is announced daily by the stock exchange
Are all Funds managed by AWTIL listed?
Yes, all Funds are listed on the Pakistan Stock Exchange.
How do a unit-holder decide which mutual funds offered by AWTIL are best suited for him/her?
You may meet with our wealth advisor to discuss your financial goals and the full spectrum of AWT Investment solutions best suited to your needs. Be sure to read each Constitutive documents or FMR prior to investing.
Selecting an appropriate category of mutual fund
What to consider before investing in a mutual fund?
Mutual funds differ in terms of investment objectives, strategies, risks and costs. When choosing a mutual fund the following should be considered:
• Investment objective
• Risk profile of fund
• Your own risk profile
• Time horizon
• Fund manager report of funds
• Offering documents of funds
• Fees and expenses
• Tax consequences
• Past performance of the AMC/fund
Before selecting an appropriate category of mutual fund(s) for your savings, you must know your investment objectives. Your financial goals are determined by your level of income and expenses, financial independence, age, lifestyle, family commitments, among many other factors. Here are some questions that you should ask yourself and likely answers that will help guide you towards selecting an appropriate mutual fund.
What products are offered by AWTIL?
AWTIL offers the seven mutual funds to its investors:
PIML Daily Reserve Fund (Money Market Scheme)
PIML Income Fund (Income Scheme)
PIML Islamic Income Fund (Shariah-Compliant Income Scheme)
PIML Strategic Multi Asset Fund (Balanced Fund)
PIML Asset Allocation Fund (Asset Allocation Scheme)
PIML Value Equity Fund (Equity Scheme)
PIML Islamic Equity Fund (Shariah-Compliant Equity Scheme)
AWTIL also offers Savings plans to its investors:
AWT Savings Plans
AWT Shuhada Savings Plans
All the above mentioned savings plans are also offered in Shariah-Compliant manner.
AWTIL also offers investment advisory to high net worth clients.
How Exactly is NAV Calculated?
How do Mutual Funds determine their Unit Price? A fund’s Net Asset Value (NAV) represents the price per unit. The NAV is equal to the market worth of assets held in the portfolio of a Fund, minus liabilities, divided by the number of units outstanding.
NAV = Current Market Value of all the Assets / Liabilities Total Number of Units Outstanding
In order to determine the sale price of the unit sales load is added to the NAV. In case there is no sales load the NAV will be the sale price as well as the redemption price. The sale and redemption price is declared on a daily basis by the Funds and can be viewed on their websites.
Can Overseas investors also open an account with AWT Investments Limited?
Yes they can, by simply contacting AWT Investments Limited
How can I start my savings with AWT Investments?
For detailed guidance on how to invest in Funds managed by AWTIL, please click here.
Can I invest in any currency?
Investment can only be made in Pak rupees.
Can Unit Holder invest in Multiple funds in AWT Investments?
Yes, Anyone can invest in multiple funds.
Can a Unit Holder transfer the Units to another investor/account holder?
A Unit Holder may transfer any Units held by that Unit Holder to any other Account Holder by submitting a properly filled Transfer Form .
Can a Unit Holder convert the Units from one Fund to another?
A Unit Holder may convert the units in one Fund into units of another Fund managed by the Management Company by submitting a properly filled Conversion Form. The Transfer Agent shall carry out the conversion after satisfying that all the requisite formalities have been fulfilled and payment of the applicable taxes, fees and/or load, if any, has been received.
What is a Benchmark?
A benchmark represents the market in which the Mutual Fund invests money. The performance of the benchmark is considered to be the average performance of all the investors in that market. A Mutual Fund’s performance is compared with the benchmark in order to find out whether the Fund performed better than the market. All actively managed Funds try to perform better than their specified benchmarks.
What is Load ?
Amount collected by a mutual fund when it sells units.
Front-end load: The fee is collected when an investor buys the units.
Back-end load: The fee collected when the investor sells back the units. Some funds do not charge any load and are called No Load funds
What is Expense Ratio?
This expresses the mutual fund's annual fund operating expenses as a percentage of the fund's average net assets. The expense ratio of a stock or equity fund is the total percentage of fund assets used for administrative, management, advertising and all other expenses. An expense ratio of 1 % per annum means that each year 1% of the fund's net assets will be used to cover expenses. The expense ratio does not include sales loads or brokerage commissions. Expense ratios are important to consider when choosing a fund, as they can significantly affect returns.
Is there a minimum time period of investment in AWT Investments?
All our schemes are open-ended which makes it easy for investors to redeem their investment amount instantly. However, our Fund Managers suggest that you should keep your investment for a longer time period in order to get better returns.
Taxation of income from mutual funds
Tax is withheld on income from mutual funds from capital gains and dividends in accordance with the income tax ordinance. It is recommended that you consult with a tax advisor to guide you in tax matters.
Will zakat be deducted on my investment ?
Yes, Zakat will be deducted unless Zakat Exemption Declaration form is submitted with the transfer agent.
What is the Procedure to Withdraw investments?
Withdraw money from your account anytime you want. Redemption payments are made to the investors within a period of a maximum 6 working days, either through a cross-cheque or through a bank transfer by submitting the Redemption form at designated Sales Points of an AMC.
Are returns of mutual funds guaranteed?
Mutual funds do not provide a guaranteed return like bank fixed deposits, bonds and government securities. Mutual fund returns are directly related to the performance of the underlying assets. Investment in mutual funds is subject to various risks which include, market risk, credit risk, liquidity risk, Interest rate risk etc. There is no protection against potential losses that occur due to market risk. There is no insurance or other protection mechanism in place.
What is Rupee cost averaging?
By investing on regular intervals, you average out any market ups and downs and accumulate them for better returns.
Tax Saving Benefits?
According to Section 62 of the Income Tax Ordinance, 2001, a “resident’ tax payer other than a company, is entitled to tax credit on investment in new shares offered to public by a public company listed on a stock exchange in Pakistan. This tax credit is available on the lower of
(a) the amount of actual Cost of Investment
(b) 20% of Taxable Income for the tax year or
(c) Rs. 1.5 million.
The tax credit availed on acquisition of such shares will be need to be paid back, if such shares are disposed off within 24 months of the date of acquisition. Units of Mutual Funds are covered under the definition of shares as per Income Tax Ordinance, 2001.
Can Unit Holder borrow against investment in units? (Pledge of Units)
Yes. The following procedure will be involved:
The investor has to fill out the Pledge Form available with us and submit it to the respective bank.
The bank will send that form to Transfer Agent to mark lien on the units.
The Transfer Agent will mark lien on the units and inform the bank.
The bank then, subject to its own conditions, releases the loan.
The loan amount will vary based on the type of Fund you are invested in.
What is Shariah compliant investment ?
Funds which meets all the requirements of Shariah law and the principles articulated for “Islamic mode of financing.”
Islamic modes of financing are as follows:
Is Unit Holder investment shariah compliant ?
AWT Investments offers a Shariah Complaint funds to meet your personal satisfaction needs. These include:
Shariah Compliant Equity Fund
Shariah Compliant Income Fund
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