Interview with Syed Ali Raza Bukhari, National Investment Trust Limited
PAGE: Tell me something about yourself, please:
SYED ALI RAZA BUKHARI: Prior to joining National Investment Trust Limited in 2018, I have had the opportunity to set up and successfully manage a Pakistan Stock Exchange Member Brokerage firm, bringing it up as a boutique institutional trading platform. I have also been associated with the asset management industry for quite some time now, spreading my 17.5 years of specialized financial services experience into a diversified landscape of multiple professional domains like investment and financial advisory, distribution, marketing & sales, specialized product development, stock brokerage and fund operations. I have also had the honor to have represented the financial markets on myriad investment forums in Pakistan with a couple in UAE and China, alike.
PAGE: Could you please tell me about the investment by foreign investors in mutual funds?
SYED ALI RAZA BUKHARI: Even though the overall participation of foreign investors in mutual funds in terms of quantum, may seem to be meager at the moment, as compared to the overall AUMs. Nonetheless, the growth of added foreign interest seem to be quite substantial, as the numbers speak. In June 2021, the total number of foreign accounts/folios have been recorded at around 1,200 amounting to Rs. 3.6 billion in value, whereas as of March 2022 the total number of accounts/folios grew to 1,940 amounting to Rs. 4.94 billion in value, showing a very promising absolute growth of 37% in value despite of the bust and boom cycles of the market, since June 2021. (Latest available data at the time of this interview)
I personally foresee that as the fintech has already come into play and convenience alongwith accessibility of local investment avenues is taking over, foreign interest will only surge with greater traction of inflows ahead.
PAGE: What is the impact of dwindling currency on investment in mutual funds?
SYED ALI RAZA BUKHARI: If we look at the available data, there may be some, but apparently insignificant impact of currency devaluation on the investment traction in mutual funds by regular investors as of now. In June 2021, the industry AUMs stood at Rs. 1,087 billion whereas in June 2022 the AUMs have been recorded to have reached Rs. 1,522 billion, posting a healthy growth of 40% YoY. Even though the last year growth i.e. FY20-21 seem to have surpassed 36% annually, however, looking at the current market and economic conditions, 40% industry growth (YoY), is nothing less than phenomenal. Yes, it would be pertinent to mention that the part of inflation that sneaks into our economy because of devaluation, will eventually bode negative on the disposable incomes and thus may ultimately squeeze the propensity to save and eventually hamper the growth of mutual funds industry in relative terms.
PAGE: Could you please tell us about the investment in mutual funds in Pakistan vis-à-vis other countries?
SYED ALI RAZA BUKHARI: I think in the global perspective, Pakistan’s mutual funds industry is at an infancy stage and there is a very long way ahead of us. Not in terms of AUMs alone, but the much needed breadth and advancements in our offerings as well. Currently we are a mere $7 billion industry, roughly around 2% of the GDP, whereas the developed world has surpassed AUMs worth trillions of dollars reaching more than 50% of their GDPs. Our neighbors alone stand at $500 billion, around 19% of their GDP. China’s AUMs stand at a whopping $3,500 billion, roughly converting to 22% of their GDP. Around 50% of the Global AUMs i.e. approx. $36,000 billion, are managed by the US alone.
So in totality, I don’t think we would make much of sense in the global or regional perspective. However in isolation, our growth over the past few years has been celebratory and there is indeed a promising future for our mutual funds industry right before us. A lot of work and man hours are being put in to create competitive and robust market policies, products along with swift onboarding digital processes to generate the much needed snow ball effect so that we may also stand at par in the regional perspective someday soon.
PAGE: Are the current policies favorable for the investors?
SYED ALI RAZA BUKHARI: There seem to be no apparent deficiency in the policies for investors. The much needed enhanced KYC/CDD structures may be felt as a deterrent or say a cumbersome process for some savvy investors. However, in totality, the investors are well protected under a well-regulated mutual funds industry. More to do with policies, I would rather point attention towards upgrading advanced inclusion strategies and robust structures.
Remaining within the prevalent policy ambit, digitalization of financial services is already picking up pace and shall be the core of our industry in the very near future. Our digital onboarding processes are being simplified and centralized with one window KYC procedures. RDA, Wallets and CDC accounts are paving way into creating ease for the investors of mutual funds through integrated efforts. So all in all, I think we are headed in the right direction and though these digital footprints may take some constructive time to create the much needed footfall, but I know it eventually will.
PAGE: What is your perspective about the economic problems on the performance of mutual funds sector?
SYED ALI RAZA BUKHARI: I would not say that we are immune to economic turmoil, however certain things do come as a blessing in disguise. The only economic problem that we face under the prevalent circumstances is inflation that eats away the propensity of savings. Despite of the fact of looming economic conditions, the higher interest rates nonetheless have attracted investors towards money market funds, because of lower competitive performance from other asset classes at the moment. However, those who understand the true essence of investments, it is always the right time to take long term equity exposure with a mix towards fixed income/money market funds. As gradually the interest rate hike starts to taper-off, other asset classes would start becoming viable in terms of locking higher rate of returns and taking exposure at relatively lower costs then. So all in all, every economic cycle has its own pros and cons that need to be addressed and capitalized through a professional who understands the investment management business and make that curve viable for the investors.