Al Meezan Investments

FAQs

You can have all your frequently asked questions answered here.

A mutual fund is an investment vehicle that collects money from many investors, and invests the collected pool of money in various investment avenues. The fund itself is managed by experienced professionals, who dedicatedly monitor the performance of the fund and manage it accordingly, on an ongoing basis.

A highly regulated financial institution that structures and manages various mutual funds.

The fee charged by the asset management company (AMC) for managing the fund. This fee is usually quoted on an annual basis and is calculated as percentage of net assets under management.

As per SECP, the categorization of the open-end Collective Investment Schemes (CIS) is made on the basis of investment parameters including eligible asset classes with pre-specified risk profile is imperative to enable the investors to make informed decision and to bring uniformity in the mutual funds industry for comparing performance of various open-end CIS. In this regard CIS can be classified as following:

Equity Scheme, Balanced Scheme, Asset Allocation Scheme, Fund of Fund Scheme, Shariah Compliant Scheme, Capital Protected Scheme, Index Tracker Scheme, Money Market Scheme, Income Scheme and Aggressive Fixed Income Scheme.

Open funds continually create new units or redeem issued units on demand. The unit holders can buy the units of the fund or may redeem them on a continuous basis at the prevailing Net Asset Value (NAV) by simply contacting the AMC

Closed end funds have a fixed number of shares outstanding and do not redeem when investors want to sell; instead, the shares trade in the secondary markets (stock markets). Its market price is determined by demand and supply and is not directly tied to its net asset value. In order to buy or sell units of a close ended Mutual Fund, the investor shall need to contact the broker and not the AMC.

A asset management company on behalf of the fund, collects money from many investors, and invests it in various investment avenues like shares, bonds, etc. This fund is managed by professionals who understand the market well, and try to achieve the fund’s investment objective by taking sound investment decisions on behalf of the fund. Investors get units of the mutual fund according to the amount they have invested and the return from investment gets reflected in the price of their units.

Some of the major benefits of investing in a mutual fund are: -
  • Diversification
  • Professional management
  • Liquidity
  • Affordability
  • Tax benefits
  • Convenience
  • Return Potential
  • Transparency
  • Flexibility
  • Choice of Schemes
  • Well regulated

Mutual funds are closely regulated by the Securities and Exchange Commission of Pakistan (SECP). SECP's primary purpose is to protect the interests of the capital market investors. Each and every mutual fund comes under the regulatory review of SECP.

SECP has provided elaborate investment guidelines and require thorough reporting by AMCs to ensure prudent functioning of mutual funds. It stipulates how investors’ money should be invested and also how these investments are to be valued on an ongoing basis.

Mutual Funds Association of Pakistan (MUFAP), a trade body of mutual funds also involves itself in devising compliance and best practices guidelines in the industry to ensure professional ethics.

Incorporated on February 27, 1995 Al Meezan is registered as a Non Banking Finance Company under the Non Banking Finance Companies (Establishment and Regulation) Rules, 2003 and NBFC Entities Regulations 2007 with the Securities and Exchange Commission of Pakistan (SECP) to carry on the business of asset management and Investment advisory. As an Investment Adviser, we are authorized to manage discretionary and non-discretionary portfolios for its clients. Al Meezan is also licensed as a Pension Fund Manager under Voluntary Pension System Rules, 2005

Shariah Advisory ensures the compliance of operations and investments with Islamic principles. At Al Meezan we guidance draw from the Shariah Supervisory Board of Meezan Bank Limited comprising of world renowned Islamic scholars.

An audit is conducted by the Shariah Advisor to ensure compliance with Islamic Shariah principles.

Islamic funds are different from conventional funds in following ways:

Presence and careful monitoring by the Shariah Board

It is ensured that all aspects of the Shariah are adhered to before, during and after an investment is carried out in a Shariah Compliant manner

Well defined and Specific Investment Avenues

Investment avenues are limited to those that comply with the Shariah

Charity and Purification

Any investment/financing that is deemed to have an element of Riba becomes liable for Purification and has to be given away as charity

Asset Ownership

The ownership of an asset lies with the party that provides financing and bears the risk e.g. financing by a bank, and assumption of all the risk (non recovery, etc) associated with it.

Permissible transactions

Transactions have to be conducted according to the Shariah, e.g. no short sales

Islamic Investment in only Shariah Compliant Avenues

For Islamic mutual funds and other Islamic Investors, investment can only be made in those securities (equity, debt, etc) which comply with well defined screening ratios.

The Trustee holds assets on behalf of the fund in a Trust and works to safeguard the rights of investors. Trustee can be a custodian as well by taking the physical possession of all securities purchased by the mutual fund, and undertakes responsibility for its handling and safekeeping. For instance, the Central Depository Company (CDC) is mostly the custodian for most fund houses in the country.

An auditor is responsible for evaluating the validity and reliability of a company or organization's financial statements. All Funds under management are audited by KPMG Taseer Hadi.

IPO stands for Initial Public Offering. It refers to sale of fresh units of a new fund.

The objective of equity funds is long-term growth of capital by investing in stocks. Because stocks are generally more volatile than other type of investments, equity funds (which are usually composed entirely of stocks) may exhibit short-term fluctuation and therefore carry a higher level of risk.

The objective of index tracker funds is to provide investors an opportunity to track closely the performance of an Index by investing in proportion to the constituent securities found in the index. Being a passive fund, it charges lower management fee from unit holders vs. a pure equity active fund.

The objective of balanced fund is to generate long term capital appreciation as well as current income from a portfolio comprising of both equity as well as fixed income securities.

The objective of income funds is to have a regular stream of income by investing in debt securities that have the potential to provide a higher level of regular income than money market funds and may also generate reasonable capital growth.

The objective of money market funds is to invest in low risk avenues. These funds aim to preserve your original investment and achieve target returns with high certainty and low risk factor by investing in investment instrument with low risk and lower volatility.

A fund of fund is a kind of mutual fund that invests in a variety of mutual funds.

The investment objective is to protect Initial Investment Value along with the prospect of growth upon the initial investment over the stipulated time period. These funds give you 100% capital protection, with the potential to earn a return that is better than that being offered by bank deposits or money market funds/ instruments. In order to achieve their objective they may seek to cash-in on any stock market upside that may be witnessed during the tenure.

    NAV stands for Net Asset Value of a mutual fund. This is basically the price of one unit of a mutual fund.

    NAV can be calculated as follows: Assets of the fund – Liabilities of the fund / Number of outstanding units for that fund

    In Pakistan many mutual funds publish their NAV at the end of every business day.

    Redemption price is the price that you receive on selling a unit of your mutual fund.

    It is a charge collected by a mutual fund when it sells units. It can be either front-end load (i.e., the charge is collected when an investor buys the units) or back-end load (i.e, the charge collected when the investor sells back the units). Some schemes do not charge any load and are called No Load Schemes

    Investing with us is a simple process for both individual and institutional investors. You can fill out the Account Opening Form & Investment Application Form.

    For first time investment, please ensure to include a legible photocopy of your NIC, NICOP/Passport, Job/Business Proof, Zakat Exemption Declaration (Individuals) and other required documents in case of corporate investors.

    You can make additional investments by following ways:

    • Make this transaction online with our Online Investment Facility (MBL Internet banking)
    • Or you can fill out the Investment Application Form

    The cheque will be made in favor of Central Depository Company (Trustee). For instance; investment in MIF will be made in favor of CDC Trustee Meezan Islamic Fund. The form along with the investment/contribution instrument will be sent to: Al Meezan Investment Management Limited, Ground Floor, Block B, Finance and Trade Centre, Shahrah-e-Faisal, Karachi.

    For more details click here

    You can withdraw money from your account at any time. You have the option to withdraw the complete amount or a specific amount based on your requirements.

    • Make this transaction online with Online – Member Services Area
    • Make this transaction online with Online – MBL Internet Banking Facility
    • Withdrawing amount through ATM Facility

    Or you can fill out the Redemption of Units Form.

    For more details click here

    You can move money from a scheme that you are currently invested in to any of the other schemes that we offer. This is called a conversion transaction.
    • Make this transaction online with Online – Member Services Area
    • Make this transaction online with Online – MBL Internet Banking Facility
    • Or you can fill out the Conversion of Units Form
    For more details click here
    You can transfer money from your investment account to any other investment account (also held with Al Meezan Investments). You have the option to transfer the complete amount or a specific amount based on your requirements. To make this transaction you need to fill out the Transfer Form For more details click here
    You can pledge the money held in your account as collateral to avail financing from a financial institution. You can pledge the entire investment value of your account or a specific amount as per your requirements. This facility is offered with selected investment schemes. To make this transaction you need to fill out the Pledge Form. For more details click here

    A Systematic Investment Plan (SIP) is a convenient method of investing in mutual funds. Under this plan, an investor contributes a fixed amount towards the mutual fund scheme at regular intervals, and gets units at the prevailing NAV.

    For more details click here.

    Investing in SIP offers two major benefits: - You can start investing with a small amount - You can average out your investment, as SIP involves buying units at different points of time and at different NAV levels.

    Rupee cost averaging is one method to save regularly and minimize the effect of market volatility on investments. By investing through methods like SIP, you invest a fixed amount in mutual funds at regular intervals. So, you get more units when the NAV is low and fewer units when it is high. Eventually, your average cost per unit is brought down.

    Islamic Finance is a financial system that operates according to the principles of Islamic Shariah.

    Following are the basic principles of Islamic Finance:

    1. Elimination of Interest / Riba from financial Transactions
    2. Asset back transactions with taking complete Risk & Reward
    3. Partnership contracts with profit & loss sharing basis
    4. Asset & Service Backing of financial transactions
    5. Gharar free contracts
    6. Avoiding gambling (maysir or Qimar)
    7. Avoiding investment in prohibited industries/Businesses

    These principles are derived from the following sources of Shariah:

    1. Quran
    2. Sunnah
    3. Ijma (Consensus of Ulema)
    4. Ijtehad/ Qiyas/ Analogy

    Islamic investment / banking is Riba free, asset backed financial activity governed by the principles of Islamic Shariah. Islamic investments must be made according to Shariah screening criterias established through collaboration between Shariah scholars and industry experts. Islamic

    Islamic modes of financing are as follows:

    Equity based

    1. Musharakah
    2. Mudarabah

    Trade based

    1. Murabaha
    2. Salam
    3. Istisna
    4. Istijrar

    Services and Rental based

    1. Ijarah
    2. Wakala

    Shariah compliant mutual funds can be operated on the basis of Mudarabah or Wakala. Usually Wakala based structure exists in mutual fund industry.

    In Wakala based structure the Asset Management Company (AMC) acts as the agent of funds’ investors and charges a fee against its services. The fee is independent of the funds’ performance.

    In Mudaraba based structure, AMC acts as Mudarib (who manages the business) and investor is the Rab-ul-Maal (who provides the capital for business). The profit is shared between AMC and the investors according to pre-agreed ratios. In case of capital loss, the Rab-ul-Maal bears the loss and the Mudarib is not liable for any loss, unless the loss has occurred due to negligence. Mudarib bears the loss of his services and will not be entitled for any remuneration on management service.

    In Wakala based structure Shariah compliant mutual funds charge certain percentage of management fee from the fund while the whole profit goes to the investors of the fund.

    Neither the returns on the investment can be guaranteed, nor the capital.

    Fund managers of Shariah Compliant mutual funds make investments according to the guidelines provided by their Shariah Advisors.

    The role of Shariah Advisors is as follows:

    • Provide guidelines for development of innovative products
    • Provide operational guidelines
    • Adequate selection of Shariah complaint instruments
    • Ensure compliance with Islamic principles
    • Purification of portfolio
    • Shariah Audit and Review

    In Shariah compliant mutual funds, the fund manager selects the portfolio which fulfils the Shariah Complaint Criteria of investment according to the Shariah Screening Criteria

    No, anyone can invest in Shariah Compliant mutual funds as they provide competitive returns

    Yes, if the investment is made in stocks according to the Shariah guidelines.

    Purification process is applied as per the calculations based on Shariah Screening criteria and such income is deducted from the fund’s income.

    Following screening criteria is followed:

    • Core Business of the Investee Company must be Halal
    • Ratio of Interest bearing Debt to Total Assets should be < 37%
    • Ratio of Non-compliant Investments to Total Assets should be < 33%
    • Non-complaint Income to Total revenue should be < 5%
    • Ratio of Illiquid Assets to Total Assets should be > = 25%
    • The Net Liquid Assets should be < Market Price

    Purification: Non-Compliant Income must be paid out in charity in order to protect the investors’ returns from Riba

    Following are the investment avenues for Islamic Income and Money Market funds

    • Sukuks
    • Placement with Islamic Banks and Islamic Windows of Conventional Banks
    • Musharakah, Mudarabah, Murabaha, and other permissible Shari’ah based financial instruments issued by organizations with high credit ratings
    • Other Structures as allowed by Shariah scholars

    Sukuk commonly refers to the Islamic equivalent of bonds. However, unlike conventional bonds, which merely grant ownership of a debt, Sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk. Sukuk securities adhere to Shari’ah principles, which prohibit the charging or payment of interest.

    Sukuk can be tradeable or non-tradeable, depending on the underlying Shariah structure. The tenor of Sukuk can be more than one year and less than year, making it an instrument for both, capital and money markets. There are different types of Sukuks for example Ijarah Sukuk.

    Ijarah Sukuk are related to leased properties and assets, they carry equal values, and are issued by the owner of the leased property or his agent. The aim of the transaction at the end is to sell the leased property through issuing Sukuk, accordingly, the holders of the certificates or Ijarah Sukuk own the asset and its charges during the rental period, each in proportionate to the certificates of Sukuk held in the leased asset. Under an ijarah contract, the usufruct of a particular property is transferred from the owner to another person in exchange for a rental payment. In other words, it is a leasing agreement with the lessor referred to as the mujir, the lessee called the mustajir and the rent paid to the lessor called ujrah.

    For example, there might be a leased building, the monthly or annual income of which goes to the certificate of Sukuk holders who are considered as partners in the ownership of the building. In addition to the return from rent, the holder of Sukuk may sell the same in the secondary market.

    Shariah Compliant Funds invests only in those investment avenues which comply with the guidelines of Islamic Shariah. Further these Funds are closely monitored by the Shariah Advisor to ensure Shariah Compliance. Periodic Shariah Audit is also conducted and Fatwas are issued by Shariah Advisor.