How can I asses if mutual funds are a safe investment?
The Securities and Exchange Commission of Pakistan in exercise of the powers conferred under section 2828(3) of the Companies Ordinance, 1984 read with regulation 66A(d) of the Non-Banking Finance Companies and Notified Entities Regulations, 2008 hereby prescribes the following requirements for AMCs to classify Collective Investment Schemes (CIS) and investment plans as per the following risk profiles:
|Category of CIS Plans
|Risk of principal erosion
|Money Market funds - AA and above rated banks and money market instruments
|Principal at very low risk
|Capital Protected Funds (non-equity), Income funds with investment in A or above rated banks, money market instruments (AA category and above) and investment in up to 6 months floating rate Govt. securities or Govt. backed sukuks, MTS.
|Principal at low risk
|CPPI Strategy based fuds, Income funds (where investment is made in fixed rate instruments or below A rated banks or corporate sukuks or bonds, spread transactions, Asset Allocation and Balanced Funds with equity exposure up to 50% mandate).
|Principal at medium risk
|Equity Funds, Asset Allocation (with O - 100% Equity exposure mandate) and Balanced Funds (with 30 - 70% Equity exposure mandate), Commodity Funds, Index Trakker Funds and Sector Specific Equity related Funds.
|Principal at high risk