Mohsin Siddiqui (Chief Reporter)
The government has granted approval for money market schemes to invest in government debt securities traded through the Pakistan Stock Exchange (PSX). The Securities and Exchange Commission of Pakistan (SECP) has issued directive number 7 of 2023, focusing on the Categorization of Open-End Collective Investment Schemes (CIS).
The SECP’s directive extends to Chief Executive Officers of Asset Management Companies, the Mutual Funds Association of Pakistan, and Trustees of Collective Investment Schemes. With the goal of enhancing and promoting capital markets, the SECP permits money market schemes to invest in government debt securities with a maturity exceeding six months and up to one year. This allowance is effective for a period of 12 months from the directive’s date, unless extended, according to the SECP.
The approval is subject to specific conditions:
- The weighted average time to maturity of net assets, including government securities, must not exceed 90 days.
- Monthly fund manager reports must disclose the actual exposure in government debt securities with a maturity exceeding six months and up to one year as a percentage of Net Assets.
- All other conditions applicable to money market schemes, including risk profiles, must comply with prevailing regulations, circulars, and directions.
Additionally, “Money Market Schemes” are required to include enabling provisions and distinctive disclosures in relevant offering documents as mandated by Regulation 44(9) of the Regulations, as per the SECP.
It is essential to note that money market funds predominantly invest in short-term fixed-income securities, such as government bonds, certificates of deposits, and commercial paper. These funds aim to maintain high liquidity by investing in low-risk short-term instruments, making them a safer investment option. Returns from money market funds are generally more stable compared to other types of mutual funds, making them suitable for new investors due to their simplicity and ease of understanding.
