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BMA Research Portal

BMA Funds is a part of the BMA Asset Management Group, including BMA Capital and BMA Trade. The BMA Research Portal has been developed to facilitate clients of all three companies, and offers a comprehensive database of market information, economic trends and analysis for Pakistan.

Private Equity

Private equity is a broad term that commonly refers to any type of equity investment in an asset in which the equity is not freely tradeable on a public stock market . More accurately, private equity refers to the manner in which the funds have been raised, namely on the private markets, as opposed to the public markets. Private equity firms were commonly misunderstood to invest in assets which were not in the public market. However this is not necessarily the case – larger private equity firms invest in companies listed on public exchanges and take them private. Passive institutional investors may invest in private equity funds, which are in turn used by private equity firms for investment in target companies. Categories of private equity investment include leveraged buyout, venture capital, growth capital, angel investing, mezzanine capital and others. Private equity funds typically control management of the companies in which they invest, and often bring in new management teams that focus on making the company more valuable.

As they are not listed on an exchange, a private equity firm owning such securities must find a buyer in the absence of a traditional marketplace such as a stock exchange. The “exit” or “selling out” is often achieved by way of an initial public offering (IPO), i.e. floating the company on a stock exchange , trade sale or secondary/tertiary buy-outs (i.e. sale to another private equity house).
source: Wikipedia

REITS

A Real Estate Investment Trust or REIT is a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes. In return, REITs are required to distribute 90% of their income, which may be taxable in the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.

Like other corporations, REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges like shares of common stock in other firms.

REITs can be classified as equity, mortgage or hybrid.

source: Wikipedia

NON-BANKING FINANCE COMPANIES(NBFC) DRAFT RULES

Credit Rating

All closed end and open end funds are obliged to obtain a credit rating, once the scheme becomes eligible for rating as per the rating criteria of the rating agency and the rating has to be updated at once every financial year.

Investment Committee

The Asset Management Company or Investment Adviser shall have at least one investment committee

Asset Allocation

Classification of funds and its asset allocation:

  • Equity fund: not less than 80% of the portfolio in equity securities
  • Balanced fund: 60% in equity securities and 40% in debt securities or vice versa
  • Income fund: 80% in debt securities
  • Asset allocation fund: zero to 100% in equity securities
  • Sector fund: 90% in the specified sector

Investment Restrictions

Cumulative investments by all collective investment schemes, managed by the same asset management company or investment adviser, as the case may be, in a single company shall not exceed 20% of issued capital of that company.

No collective investment scheme shall invest more than thirty five percent of its total net asset value in any single group or consortium.

Fees and Charges

Authorization fee of closed end and open end is one million rupees.

Formation Costs: Formation Costs is reimbursable by the fund to the Investment Adviser/ Asset Management Company over a period of not less than five years. However, in case of specific period fund of less than five years, the formation cost shall be reimbursable in equal amounts up to the maturity date of the fund. Formation Cost shall not exceed 1% of the Pre-IPO capital in case of open end fund and 1% of the paid-up capital in case of a closed end fund.

Fees of Investment Adviser and Asset Management Company: The Investment Adviser/Asset Management Company is entitled to be paid monthly in arrears fifty percent of accrued remuneration.

Annual Fee: the fund has to pay within four months of the close of its year of account, an annual fee to the Commission, an amount equal to one twentieth of one percent of its average annual assets.

NATIONAL COMMODITIES EXCHANGE LTD (NECL)

Eligibility for Registration

A person shall be eligible as broker if he:
• is a Member of the Exchange
• is a citizen of Pakistan
• has experience of not less than five years in the business of buying, selling or dealing in commodities, Commodity Futures Contracts or other securities;
• has the minimum net capital and minimum net worth as determined by the Exchange and approved by the Commission;

Certificate of Registration

The certificate of registration shall be valid for one year.

Suspension of Registration

Registration will be suspended if the broker:
• Has failed to remain in compliance with any conditions subject to which certificate of registration was granted.
• Has furnished wrong or false information;
• Has indulged in manipulating price rigging or cornering activities in an Exchange, • Has been suspended by an Exchange.

General obligations and responsibilities

The brokers shall be responsible to keep and maintain the books of accounts, records and documents as specified in the Ordinance, the Act an rules

Code of Conduct

A broker shall abide by the code of conduct as provided in the Schedule

Audit

A broker shall undergo an annual system audit in accordance with the directions issued by the Commission.

Maintenance of Books of account

Every broker shall prepare and maintain books of account and other documents, in electronic or manual form, that will disclose a true, accurate and up to date position of the business.

Registration of Commodity Futures Contract

Every Commodity Futures Contract shall be registered with the Commission under the rules to become eligible for dealing on an Exchange.

Restriction on dealings

• No person shall transact any business in Commodity Futures Contracts on any Exchange unless he is a broker.
• No member shall act as a broker on an Exchange outside such Exchange.

Prohibition on Exchange Deals

No person who is employed by an Exchange or who has been employed by an Exchange at any time during the preceding six months shall, directly or indirectly deal in any Commodity Futures Contract traded or cleared by the Exchange of which he or she is or has been at any time during the preceding six months, an employee.

Liability for contravention of Rule 32

Where a person contravenes the provisions of Rule 32, the Commission may ask such persons to show cause for compensating any person who has suffered loss for such contravention and initiating proceedings against him.

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