Equity mutual fund assets fell 13% in March 2026 to Rs570 billion as investors shifted to safer instruments amid a PSX downturn. The broader mutual fund industry’s total assets declined 3% to Rs4.37 trillion.
Islamabad: Assets under management in equity mutual funds fell sharply in March 2026 as investors moved away from stocks and into lower-risk investment options amid worsening market conditions at the Pakistan Stock Exchange (PSX).
According to data compiled by Optimus Capital Management, equity fund assets declined 13% month-on-month to Rs570 billion in March from Rs655 billion in February. The drop was steeper than the overall contraction in the mutual fund industry, where total assets under management slipped 3% to Rs4.37 trillion.
The decline also reduced the share of equity funds in the total mutual fund pool to 13%, compared with 14.5% a month earlier, indicating a stronger investor preference for capital preservation.
Market participants said the retreat reflected a broader risk-off trend, with investors pulling money out of equities and shifting towards safer, yield-based instruments such as money market and income funds. A senior fund manager said the correction at the PSX had directly led to outflows from equity funds. The fund manager added that higher oil prices, pressure on the rupee and external uncertainty had hurt investor sentiment and encouraged a move into defensive assets.
The reversal comes after the PSX, which had been among the better-performing markets only a few months earlier, came under pressure following the Israel-US war on Iran and Pakistan’s dependence on imported energy.
The Overseas Investors Chamber of Commerce and Industry (OICCI), in a recent social media post, said Pakistan’s equity market had delivered 51% returns in rupee terms last year, but by the end of the third quarter of FY26 it had become the world’s third worst-performing market, recording a 14.6% loss in dollar terms.
In the same post, OICCI noted that energy-exporting markets including Ghana and Oman posted gains of more than 43%, supported by rising oil prices. It said the contrast highlighted Pakistan’s macroeconomic vulnerability.
A brokerage analyst said every increase in oil prices widened Pakistan’s external imbalance, put further strain on the rupee and reduced equity valuations. The analyst said the latest geopolitical shock had once again exposed these weaknesses.
The market’s structural weaknesses had also been aggravated by a limited foreign investor base since Pakistan’s downgrade to MSCI Frontier Markets in 2021. Without large and stable foreign inflows, the PSX has become more exposed to volatility and longer downturns.
Across the mutual fund industry, the reduction in equity exposure was widespread. MCB Funds recorded a 19.1% fall in equity assets, JS Investments 21.9%, and Al Habib Asset Management 24.3%. Among other major firms, NBP Funds posted a 14% decline, UBL Funds 12.5%, and Alfalah Asset Management 15.1%. HBL Asset Management, which had relatively defensive portfolios, also saw a 2.4% decrease.
Meanwhile, low-risk categories continued to attract investor flows. Money market and income funds together retained a dominant share of industry assets, supported by high interest rates and ample liquidity in the financial system.
The continued decline in equity participation presents a longer-term challenge for Pakistan’s capital markets. With equity funds now making up only 13% of total industry assets, the mutual fund sector remains concentrated in debt-based investments, limiting the supply of risk capital available to businesses.