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Islamic Funds for Financial Planning – Giving best of both worlds

Al Huda - International Conference on Islamic Fund and Investment. Islamic Funds for Financial Planning – Giving best of both worlds. Outline. Objective of this presentation Need for Financial Planning How Islamic Funds in the market can help achieve your Financial Objectives

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Islamic Funds for Financial Planning – Giving best of both worlds

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  1. Al Huda - International Conference on Islamic Fund and Investment Islamic Funds for Financial Planning – Giving best of both worlds

  2. Outline • Objective of this presentation • Need for Financial Planning • How Islamic Funds in the market can help achieve your Financial Objectives • Growth in Islamic Funds and Way Forward

  3. Objective • To explain the importance of • Financial Planning and to • illustrate that Islamic Funds • are fully poised to cater to • all financial needs while • strictly abiding with • ShariahPrinciples

  4. The importance of Financial Planning

  5. The importance of Financial Planning - Concerns • Political instability • Rapid political & economic changes • Demographic changes • Businessmen concerns • Large number of dependents

  6. The importance of Financial Planning • We have a population of almost 190 million people • The population growth rate is approximately 1.5-2% p.a. • The GDP growth rate has been 2-2.5% p.a. over the last 2 years • The unemployment rate amongst the youth is over 7% • The average monthly salary in Pakistan is PKR 7500 (with 35% of the population below the international poverty line) • The average annual inflation for the last 10 years has been close to 11% Aren’t these numbers thought provoking enough??

  7. The importance of Financial Planning We know that money tomorrow is not worth the same as money today. Consider a fixed monthly expense of PKR 30,000 p.m. today over time…. What costs PKR 30,000 today will cost over PKR 250,000 in 20 years Inflation: 11.4% - CPI 2001-10 average Source: Pakistan Statistical Yearbook 2011, Federal Bureau of Statistics

  8. How to hedge against these growing expenses?

  9. The importance of Financial Planning Investments via Financial Planning can help you fight these growing expenses Inflation: 11.4% - CPI 2001-10 average Source: Pakistan Statistical Yearbook 2011, Federal Bureau of Statistics Savings account returns assumed at 6% per annum Equity Return is the CAGR of KSE 100 for 1991-2011

  10. The importance of Financial Planning At every stage the consumer is making a choice which is induced by his environment (e.g., friends and family) and his current lifestyle (job, family size etc) . He makes a decision hoping that it will enrich his lifestyle Inflation  Children’s Education  Daughters’ Wedding  Seeking avenues for fulfilling these needs Saving & Investment Needs Maintenance of standard of living   Savings for retirement  Savings for Hajj for self & parents

  11. FINANCIAL PLANNING VIDEO

  12. Islamic Funds can help achieve your Financial Objectives

  13. Islamic Funds for your Financial Objectives • According to a survey conducted by • AC Neilson for UBL Fund Managers in 2011, • 43% of the surveyed individuals • preferred investing in Islamic Financial • Products while only 23% preferred • Conventional Financial Products

  14. Islamic Funds for your Financial Objectives • Meeting Short-term & Emergency needs • CashFunds • Regular Income to meet Growing Expenses • LowRiskIncomeFunds

  15. Islamic Funds for your Financial Objectives • GrowingWealth Over the Long-term • Equity Funds and Sukuk Funds • Planning for your Children’s Higher Education & Marriage • Children Savings Plans • Planning for post-retirement years • Voluntary Pension Schemes

  16. Islamic Funds for your Financial Objectives • Cash Funds (To meet Meet Short-term & Emergency needs) • There are currently two Islamic Money Market Funds in the industry comprising over PKR 7 billion of AUM • Money Market Funds invest in low risk and liquid instruments that can help clients meet their short term needs and enables them to access their money immediately at a time of emergency

  17. Islamic Funds for your Financial Objectives • LowRiskIncomeFunds (For Regular Income to meet Growing Expenses) • There are currently ten low risk Islamic Funds in the industry comprising over PKR 25 billion of AUM • Low Risk Income Funds invest in high quality instruments of a medium to long term tenure that can help clients earn a regular income at an attractive profit rate

  18. Islamic Funds for your Financial Objectives • Equity Funds (GrowingWealth Over the Long-term) • There are currently five Islamic Equity Funds in the industry comprising over PKR 6.5 billion of AUM • Islamic Equity Funds invest in equities of Shariah Compliant businesses that earn superior returns and help clients earn their long-term goals

  19. Islamic Funds for your Financial Objectives • Sukuk Funds (GrowingWealth Over the Long-term) • There are currently four Islamic Sukuk Funds in the industry comprising over PKR 2 billion of AUM • Islamic Sukuk Funds invest in Corporate and Government Debt structured in compliance with the Shariah and can help clients earn high returns in the long-term

  20. Islamic Funds for your Financial Objectives • Voluntary Pension Schemes (Planning for post-retirement years) • There are currently six Islamic Pension Funds in the industry comprising over PKR 1 billion of AUM • Islamic Pension Funds comprise of Equity, Debt and Money Market Funds that clients invest in as per their Risk Profile and save for their retirement while also gaining attractive Tax Benefits

  21. Islamic Funds for your Financial Objectives • Children Savings Plans (Planning for your Children’s Higher Education & Marriage) • This is a fundamental need that has not been specifically addressed by Islamic Funds • However, this is an area that is being worked upon and solutions will be available to clients shortly

  22. Growth in Islamic Funds & Way Forward

  23. Overall Growth in Islamic Funds • Assets Under Management Islamic Funds although a small percentage of overall Islamic Deposits (9%), are growing as a percentage of Islamic Deposits

  24. Overall Growth in Islamic Funds • Market Share Islamic Funds constitute 16% of the Total Assets Under Management and the share has grown significantly over the last 3 years

  25. Way Forward for Islamic Funds • Islamic Funds are fully poised to cater to all the basic financial needs and Asset Management Companies are working towards bringing solutions for more specific needs • Islamic Funds have witnessed commendable growth over the last 3 years and with increasing inclination towards Shariah Compliant investments the growth will only accelerate • However, the following areas demand more focus: • More needs to be done for the marketing of Islamic Funds, a large segment of the population is not even aware of the options they have for Islamic Investments • The Investments Solutions needs to be more clearly differentiated from their conventional counterparts • The structure and mechanism of Islamic instruments needs to be explained with more clarity and detail to ensure investor comfort in the instrument’s Shariah Compliance • We as Islamic Fund Managers are on the right path of growth and with more attention on the highlighted subjects we will be able to provide clients with the right Investment Solutions in the most Shariah Compliant manner

  26. Thank you!!

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