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COMSATS INSTITUTE OF

INFORMATION TECHNOLOGY
ISLAMABAD Campus

PAKISTAN PREMIERE FUND

ANALYSIS OF FUND MANAGER PERFORMANCE

COURSE : FINANCIAL DECISION


MAKING

SUBMITTED TO : SIR. KHALID


SOHAIL

Submitted by : Sana Munir

MBO - II

TABLE OF CONTENTS
INTRODUCTION..............................................................................................................2
Khadim Ali Shah Bukhari & Co. Ltd - KASB............................................. ...................3

KASB Funds................................................................................................. ..............4

METHODOLOGY............................................................................................................5

Stock Return................................................................................. ............................5

Market Return.................................................................................. .........................5

Risk free rate.............................................................................. ..............................5

Excess Market Return - X.............................................................. ............................5

Excess Stock Return - Y...................................................................................... .......5

BETA CALCULATION....................................................................................................6

RATIO CALCULATION..................................................................................................6
4.Compound annual growth rate:............................................................................. .6

DATA ANALYSIS..............................................................................................................7

CONCLUSION..................................................................................................................8

INTRODUCTION

Closed-End Fund

A closed-end fund, or closed-ended fund is a collective investment scheme with a


limited number of shares.
New shares are rarely issued after the fund is launched; shares are not normally
redeemable for cash or securities until the fund liquidates. Typically an investor can
acquire shares in a closed-end fund by buying shares on a secondary market from a
broker, market maker, or other investor as opposed to an open-end fund where all
transactions eventually involve the fund company creating new shares on the fly (in
exchange for either cash or securities) or redeeming shares (for cash or securities).

Mutual Fund

A mutual fund is a professionally managed type of collective investment scheme that


pools money from many investors and invests it in stocks, bonds, short-term money
market instruments, and/or other securities.[1] The mutual fund will have a fund manager
that trades the pooled money on a regular basis.

Mutual funds can invest in many kinds of securities. The most common are cash
instruments, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for
instance, can invest primarily in the shares of a particular industry, such as technology or
utilities. These are known as sector funds. Bond funds can vary according to risk (e.g.,
high-yield junk bonds or investment-grade corporate bonds), type of issuers (e.g.,
government agencies, corporations, or municipalities), or maturity of the bonds (short- or
long-term).

KHADIM ALI SHAH BUKHARI & CO. LTD - KASB


Khadim Ali Shah Bukhari & Co. Ltd. (KASB) continues to be the second largest among
the seven corporate brokerage houses listed on the Karachi Stock Exchange in terms of
both asset size and equity base. KASB was incorporated as a public limited company in
August 1991.
The principal shareholders include Mr. Nasir Ali Shah Bukhari, Mr. Arif Ali Shah
Bukhari and Sheikh Suleiman Ahmed al Hoqani - an investor from Oman - who between
themselves hold approximately ninety percent (90%) of the company’s shares. KASB
currently operates from offices in Karachi, Lahore and Islamabad. The company has six
major business segments: equity sales & trading, securities & economic research, fixed
income & money market broking, interbank foreign exchange broking, investment
advisory and investment banking. KASB also has an agreement with Merrill Lynch (ML)
to jointly produce research that is distributed globally under ML’s brand name.

KASB FUNDS

KASB Funds Limited (KFL) was incorporated on January 24, 2005. The company is
licensed by SECP to carry out Asset Management and Investment Advisory Services.
KASB Funds' institutional sponsors are KASB Group and BlackRock Merrill Lynch
Investment Managers (BlackRock) KASB has been as trusted name in the financial
industry for over five decades and its umbrella of financial services includes a brokerage
house, a commercial bank and asset management company.

KASB Funds' institutional sponsors are KASB Group and BlackRock Merrill Lynch
Investment Managers (BlackRock). BlackRock is a premier provider of global
investment management, risk management and advisory services to institutional and
retail clients around the world. As of December 31, 2006, BlackRock's pro forma assets
under management totalled over $1.1 trillion across fixed income, liquidity, equity,
alternative investment and real estate strategies

Pakistan Premier Fund, which was previously known as KASB Premier Fund, was
acquired from Khadim Ali Ali Shah Bukhari-closed end fund, with at least Rs 475 million
fund at hand.
METHODOLOGY

The purpose of the study was the analysis of fund manager performance. The Fund
selected for the study was PAKISTAN PREMIER FUND. The fund is listed in Karachi,
Islamabad, and Lahore stock exchanges. The performance of the fund is calculate through
retrieving its required data from the site, www.Businessrecorder.com. Three years
information i.e. 36 months has been collected to analyze the performance of the fund
within past 3 years. The data collected from the site includes
• Closing stock prices ( specific date standardize for each month i.e.15 )

• Index (the values in relation with the specific date)

For analyzing the fund manager performance it is necessary to compute the risk (beta) for
the FUND. Calculation of beta requires the information which was retrived by applying
the formulas

STOCK RETURN
The stock return is being calculated from the Closing rates of the fund for 15th of
each month in 3 years. The formula is being applied for calculating stock return
e.g. C10-C9/C9

MARKET RETURN
Similarly market return is computed on the basis of the index value for the same
dat,e 15th of each month, this shows the market return of the one day in a month
through a formula E10-E9/E9

RISK FREE RATE


Risk free rate is being collcted from the site of State bank and the data provided.

EXCESS MARKET RETURN - X


It is the difference of the market return and Riskfree rate. Market return – Risk
free rate

EXCESS STOCK RETURN - Y


It is the difference between stock return and risk free rate. Stock return- Risk Free
rate

XY – the product of both excess returns is taken


X^2– square of the excess market return is taken.
BETA CALCULATION

The calculation of beta is done in order to compute the ratios for the fund and analyze its
performance. Beta (B) is used to measure the risk. I have used two methods to calculate
the risk of the fund. The menthods are
• B= N∑XY - (∑x) * (∑Y)/N * (∑x2)-(∑x)2

• B = (R s,m * Ss) / Sm

RATIO CALCULATION
I have applied 5 ratios to analyze the fund’s performance. The ratios are
1. TREYNOR RATIO : The Treynor ratio is a kind of rating standard.
T = rp - rf /β

2. JENSEN ALPHA : it is used to determine the excess return of a security or portfolio of


securities over the security's theoretical expected return.

αj = Ri - ( Rf + βiM (RM - Rf)))

3. SHARPE RATIO: it is a measure of the excess return (or Risk Premium) per unit of risk in an
investment asset or a trading strategy

S = E (R - Rf)/ σ

4. COMPOUND ANNUAL GROWTH RATE:


CAGR = (ending value/beginning value) (1/# of years) – 1

5. SORTINO RATIO: measures the risk-adjusted return of an investment asset, portfolio or strategy
S = R - T / DR
DATA ANALYSIS

From the calculation and computations of the Pakistan premiere fun, it can be analyzed
that the Fun is performing at low risk and less return because after the computation of
Beta β it can be seen that that value of beta is less then zero, β<0, so the fund is
having minimum risk as well as less return

The ratios are calculated so that, the performance of the fund manager gain be seen.

• Treynor ratio does not show any effect in the fund, because this ratio is used to
compare two portfolios.

• Jensen’s Alpha is computed altogether for 3 year period time

• Sharpe ratio

• Compound Annual growth rate ratio shows that, the growth of the fund over the
time, which is based on annual basis

• Sortino ratio
CONCLUSION

Due to economic Crisis in Pakistan, the companies are facing problems at high level. The
closed end funds listed in KSE 100 index are also not performing well just because, the
economic crisis has covered the world drastically.

The company may have done better when the economic recession will set aside. The
companies are facing losses. The positive point is the investment made in the company
would comprise of less risks. But at the same time returns over the investment would also
be low.