Managing a Shariah-Compliant Capital Protected Fund through Turbulent Times

The case examines the performance and challenges faced by the Meezan Capital Protected Fund (MCPF) ensuing from the global financial crisis of 2008. The MCPF launched in May 2008 was the first-ever Shariah-compliant capital protected fund (CPF) offered in Pakistan targeted at conservative investors seeking principal protection along with upside exposure to equities through Shariah-compliant products and securities. The case is based on the scenario, the fund manager, Farhan Lakhani, is facing in early July 2009 following the colossal decline in stock markets crushing investor confidence in the financial system. Unlike equity funds, which had experienced an unprecedented drop in value during this period, MCPF had not only preserved its capital but also managed to generate a small positive return of over 1 per cent in terms of net asset value. Farhan sets out to capitalize on the extraordinary opportunity created by the financial crisis for CPFs to carve out a permanent space among an assortment of funds to mitigate risk for investors with low-risk appetite. He has to carefully review and analyse some of the key strategic choices to enhance the fund's returns to meet investor expectations as equity markets recover from their historic lows; share his recommendation with the investment committee in two days.