RNB Money Market Mutual Fund Outperforms Peers
May 31, 2022 (MLN): As liquidity and convenience lead investors to hoard cash and savings, money market mutual fund returns are their biggest selling point. In April 2022, all 24 money market mutual funds generated attractive returns.
For the uninitiated, money market funds are investment products that allow investors to earn interest in a less risky environment than the stock market.
In April 2022, the State Bank of Pakistan (SBP) held an emergency monetary policy meeting and raised the policy rate by 250 basis points (bp) to 12.25% to preserve the stability of the external account and prices in a context of soaring commodity prices.
High commodity prices amid heightened political uncertainty and tight liquidity conditions led to a sharp rise in secondary market yields at all maturities. The 3m, 6m and 1yr yields increased by 265bps, 236bps and 213bps respectively while the 3yr and 5yr yield also increased by 112bps and 65bps respectively.
In April 2022, SBP conducted three treasury bill auctions with a target of 1.7 trillion rupees against a maturity of 1.558 billion rupees.
In the first treasury bill auction, bids worth Rs 644 billion were accepted at cut-off yields of 12.80%, 13.25% and 13.30% for warrants of 3 months, 6 months and 12 months. In the second treasury bill auction, an amount of around Rs. 579 billion was accepted at a limit yield of 13.50% and 13.85% for terms of 3 months, 6 months and 12 months , while in the third treasury bill auction, bids worth Rs 629 billion were accepted at boundary yields of 14.79%, 14.99% and 14.81% for the terms of 3 months, 6 months and 12 months.
On the GDP front, deals worth Rs 387 billion were made for 3-year, 5-year and 10-year terms at cut-off yields of 13.30%, 12.95% and 13, 15% when no offer has been received for 15 years, 20 years. years and 30 years in the auction.
Based on data compiled by Mettis Global, all 24 funds generated positive returns in April 2022 thanks to a pragmatic yet safe approach. It is relevant to note that only two of them outperformed the benchmark.
To get a clearer picture, we’ve compared the returns of the major money market funds in the chart below against an average benchmark rate; 70% – a 3-month average of PKRV and 30% of the 3-month average deposit rates of 3 MUFAP-selected ‘AA’ rated banks which has been set at 11.45% for April 2022.
Furthermore, the three ‘AA’ rated designated banks selected by the Mutual Fund Association of Pakistan (MUFAP) are Samba Bank, Faysal Bank Limited and Askari Bank Limited.
As shown in the chart above, the RNB Money Market Fund (NBMFM) emerged as the winner among all other money market funds which achieved an annualized return of 12.1% during the month, beating the benchmark return of 11.45%.
This outperformance is net of management fees and all other expenses. In order to maintain liquidity, the fund had, at the end of the month, an exposure of approximately 18% in T-Bills, 59.4% in bank deposits and 21.8% in Money Market Placements (LOP).
Regarding the stability of the fund, the Pakistan Credit Rating Agency (PACRA) has rated its stability at “AA”, which means a very strong ability to maintain a relative stability of returns and a very low risk exposure.
Alfalah GHP Cash Fund (AGHPCF) came in second, posting a competitive net return of 11.77%. With a “low” risk profile, the net asset value (NAV) of AGHPCF stood at Rs 513.34 in April 2022. The fund has been assigned an “AA(f)” stability rating by PACRA as of October 8, 2021. At the end of April 2022, the fund held 34% of assets in treasury bills, approximately 19% was invested in banks/DFIs while 30.87% of total assets were accumulated in cash.
According to the data, Alfalah GHP Money Market Fund (AGHPMF) emerged in third position with an annualized return of 11.31% compared to the benchmark return of 11.45%. Cash asset allocation decreased to 42.1% from 76% while placements with banks and DFIs were recorded at 19.3%. The fund had around 26% exposure to Treasuries, up from 22.3% in March 2022.
As for the total assets under management (AUM) of the mutual fund industry, it fell by 5% MoM to 1.07 trillion rupees in April 2022. Analysis by category showed that the AUM of money market funds fell 14% MoM to Rs317bn in April 2022.
Copyright Mettis Link News
Published on: 2022-05-31T16:54:46+05:00