Islamic Fund Management
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Islamic Mutual Funds
The fund management industry in Pakistan started in 1962 when the National Investment
Trust introduced the NIT as an open-ended mutual fund. In 1966, the ICP launched closed-end
funds (MUFAP, 2012). The ICP had subsequently offered a series of close-ended mutual funds.
In the early 1990s, 26 close-ended ICP mutual funds were floated (Shah & Hijazi, 2005). After
more than 40 years, the mutual fund industry was opened to the private sector in 1995, i.e.
through AMCs, with the introduction of the Asset Management Company Rules. Subsequently,
the first private open-ended fund was launched in 1997 (SECP, 2013).
The first Islamic fund management company started about 5 years later when the SECP
granted a licence to Al Meezan Investment Management Limited in 2003. However, growth
only became more pronounced from 2011 onwards, when Islamic funds began expanding at a
faster and steadier pace than conventional funds, as depicted earlier i Al Meezan
Investment is the only full-fledged Shariah-compliant investment firm operating in Pakistan. It
commanded the biggest share of the country’s Islamic fund management industry, i.e. 41%,
and 15% of the overall industry as at end-February 2018 (Al Meezan, 2018).
Unlike Malaysia, Pakistan’s fund management industry is run by domestic firms, which offer
conventional and Islamic funds via windows (except Al Meezan Investment which offers
Shariah-compliant solutions only). As at end-June-2017, a total of 22 AMCs and IAs were
registered and licensed by the SECP, managing 214 open- and close-ended funds as well as 19
pension funds.
Effective from 2014, Islamic mutual funds have only been structured as open-ended funds, as
shown in Conventional funds, however, still offer close-ended equity funds, with
PKR22,805 million of AuM as at end-2017.
Based on NBFC Regulations 2008 (Rule 55 (6) and (9)), all Shariah-compliant funds must
comply with the following regulatory requirements:
Exposure limits of the Islamic fund shall be lower of its net assets or the issued
securities of a company:
 Maximum limit (equity securities) = 15%
 Maximum limit (debt securities) = 15% of single use
 Maximum limit per sector = 35% or index weight, whichever is
higher, subject to a maximum of 40%