Eurekahedge Interview with Khashe Ahmad Lodhi Head of Islamic Funds at UBL Fund Managers
Post on: 16 Июнь, 2015 No Comment
Interview with Khashe Ahmad Lodhi, Head of Islamic Funds at UBL Fund Managers
UBL Fund Managers Limited (UBLFM) is a wholly-owned subsidiary of United Bank Limited, making it the first asset management company to be launched by a bank in Pakistan. UBLFM has been operating since the year 2002 and are currently ranked number 1 in both assets under management (AUM) in fixed income schemes and in terms of AUM of private sector open-end mutual funds (out of 35 existing companies). UBLFM has been awarded a Management Quality Rating of AM2 Minus by JCR-VIS Credit Rating Company Limited.
Khashe Lodhi is head of Islamic funds at UBLFM. Prior to this, he was vice-president in the investment banking division at Pakistan Kuwait Investment Company. At Pak Kuwait, he was instrumental in the formation of an asset management company and a brokerage company. He was also a director in these companies. He has first-hand knowledge and experience of both fixed income and equity markets. Lodhi started his career in 1993 with Crescent Investment Bank Limited as a fixed income dealer in the treasury and funds management department. In 1996, he moved to the equities side as a dealer in the capital markets department. Later on, he became chief dealer and head of capital markets and managed a fund of over Rs6 billion. He has also worked for Mashreq Bank Pakistan, Crescent Commercial Bank and PICIC.
Lodhi is an MBA graduate from Institute of Business Administration (IBA). He is also a visiting faculty member of IBA and has taught courses in finance including portfolio management.
- UBLFM has developed the United Composite Islamic Fund (UCIF) as well as the United Islamic Income Fund (UIIF). How are their approach different from others and what is the overall proposition for investors?
UCIF is an open-ended fund that offers its investors an opportunity to invest in a diversified portfolio of Shariah-compliant investments with the objective of maximising medium- to long-term returns for a given level of risk. The investments in the fund are diversified both in terms of securities within an asset class as well as across asset classes. UCIF is a composite fund that invests in both equities and fixed income instruments. On the equities side, the fund can invest in all the Shariah-compliant companies listed on KSE-100 Index. On the fixed income side, the fund can invest in all the Shariah-compliant fixed income securities. The fund can also invest in Shariah-compliant equities and fixed income securities outside Pakistan.
The benchmark of UCIF is 50% Dow Jones-JS Pakistan Islamic Index plus 50% of the average fixed income Shariah-compliant deposit rate of different Islamic banks. The rationale behind this benchmark is that it totally encompasses both the equities and fixed income portions of the fund.
UCIF is the only composite fund in the mutual fund industry in Pakistan. It offers unique features of both equity and fixed income to its unit holders. Being a composite fund, UCIF offers a leeway to the fund manager to continuously switch its investments between equities and fixed income depending on the available return while keeping in mind the associated risk. This helps the fund manager in enhancing the return of the fund for a given level of risk.
An open end mutual fund, UIIF on the other hand endeavours to provide attractive returns to its investors by investing in Shariah-compliant income instruments while taking into account capital security and liquidity considerations. The fund can invest in all Shariah-compliant fixed income securities within and outside Pakistan.
The benchmark of UIIF is the average of 6-month placement rates of three Islamic banks. The rationale behind this benchmark is that it reflects the major portion of investments of the fund in the absence of significant asset classes. The benchmark is likely to change as the Islamic market further develops and more investment opportunities in diversified asset classes become available.
UIIF offers following two types of units to its investors:
- Income units which are suitable for investors who desire a source of regular income while also aiming to preserve capital.
- Growth units which are suitable for investors who seek capital appreciation as their funds are automatically re-invested.
The investment philosophy of UCIF is medium risk — medium return and buy-and-hold. On the equities side, a fine blend of value, growth and dividend stocks is maintained in the fund so as to diversify the portfolio and minimise risk. On the fixed income side, the fund aims to maximise annual income for the investors while preserving the capital.
The investment philosophy of UIIF is to maximise annual income for the investors and to preserve the capital while keeping exposure in a blend of short-, medium- and long-term income instruments. The fund aims to outperform the benchmark as well as its peer income group funds.
On the equities side, the fund manager, in close liaison with the research analysts, identifies securities that offer a blend of value, growth and dividends as well as significant upside in their values as compared to their fair values. The research analysts carry out thorough research and detailed credit evaluations and based on that research give their recommendations to the investment committee (IC). The final approval rests with the IC and the fund manager invests after the final approval. If a security is trading at a discount of up to x% to its fair value, it becomes a ‘BUY’.
A universe of approximately 50 listed companies is maintained with updated earnings and valuation expectations.
UCIF portfolio is well diversified both in terms of securities within an asset class as well as across asset classes.
As of 31 December 2007, the equities section of the UCIF portfolio had 24 scrips that represented 14 different sectors of the KSE-100 Index.
As of 31 December 2007, the net assets of the fund were PKR1,055 million and the following were the top ten scrips in the portfolio as a percentage of net assets:
