PSX slump triggers 13% fall in equity funds as investors shift to low-risk assets

Pakistan’s mutual fund industry reduced exposure to equities in March 2026, with assets under management (AUMs) in equity funds falling 13% month-on-month amid a sharp decline in stock market performance, according to a news report. 

Equity AUMs dropped to Rs570 billion in March from Rs655 billion in February, according to data compiled by Optimus Capital Management. The decline was significantly steeper than the broader mutual fund industry, where total AUMs fell 3% to Rs4.37 trillion.

The contraction reduced equity funds’ share in total industry assets to 13%, down from 14.5% in the previous month, indicating a shift in investor preference towards capital preservation.

Market participants said the movement reflects a “risk-off” trend, with investors reallocating funds from equities to lower-risk instruments such as money market and income funds.

The shift follows a downturn in the Pakistan Stock Exchange, which has come under pressure amid rising oil prices, currency weakness and external uncertainty linked to global developments.

Data shared by the Overseas Investors Chamber of Commerce and Industry showed that after delivering 51% returns in rupee terms last year, Pakistan’s equity market ranked among the worst performers globally in the third quarter of FY2026, posting a 14.6% decline in dollar terms.

Within the mutual fund industry, major asset managers reported double-digit declines in equity AUMs. JS Investments recorded a 21.9% drop, Al Habib Asset Management 24.3%, and MCB Funds 19.1%, while NBP Funds declined 14%, UBL Funds 12.5%, and Alfalah Asset Management 15.1%. HBL Asset Management reported a smaller decline of 2.4%.

In contrast, money market and income funds continued to attract inflows, supported by higher interest rates and liquidity in the system.

Analysts said Pakistan’s reliance on imported energy and sensitivity to external shocks continue to affect market performance, particularly during periods of rising global oil prices.

The decline in equity participation has reduced the availability of risk capital, with equity funds now representing a smaller share of total mutual fund assets.