There are a few anomalies in the capital markets that are difficult to understand and even more difficult to explain. One such dichotomous example is a fund called Habib Growth Fund. The fund is currently listed on the stock exchange which means that it is a closed end fund quoted on the exchange. In addition to that, this is listed as HGFA which stands for Habib Growth Fund (A) which shows that it has been carved out from a previous fund. Throwing so many terms in quick succession can confuse a reader who has little knowledge on these technical terms. Lets start by unpacking the basics of mutual funds before explaining how this fund is existing in two states at one time.
Mutual funds 101
A mutual fund is an investment vehicle where an asset management company (AMC) collects the funds from a group of investors and then invests in different asset classes. Based on the nature of the risk appetite of the investors, the AMC is given a mandate on where to invest these funds.Â
A 65 year old pensioner would want to supplement his income by investing in income generating assets which provide a stable and constant income to him at his old age. He has little to lose in terms of his investment and would want his investment to yield a return. He will invest in an income fund which invests in government securities or corporate debt which has little risk and an average return.
On the other end of the spectrum would be an 18 year old who can lose a part of his savings as he is not dependent on them to cover day to day expenses. He will be willing to invest in a stock fund which can yield higher returns, however, there is a chance that he can see his initial investment lose value as well. He will be willing to invest in a stock fund which will give him a higher yield compared to the income fund. The content in this publication is expensive to produce. But unlike other journalistic outfits, business publications have to cover the very organizations that directly give them advertisements. Hence, this large source of revenue, which is the lifeblood of other media houses, is severely compromised on account of Profit’s no-compromise policy when it comes to our reporting. No wonder, Profit has lost multiple ad deals, worth tens of millions of rupees, due to stories that held big businesses to account. Hence, for our work to continue unfettered, it must be supported by discerning readers who know the value of quality business journalism, not just for the economy but for the society as a whole.To read the full article, subscribe and support independent business journalism in Pakistan
