Pakistan's mutual fund industry reached almost Rs4.5 trillion in assets under management (AUM) for 2025-26, reflecting continued expansion of collective investment schemes and growing participation from institutional and retail investors, according to data shared by the Securities and Exchange Commission of Pakistan. As of June 30, 2026, total AUM stood at Rs4.492 trillion. Shariah-compliant schemes accounted for 49.02%, or Rs2.21 trillion, while conventional schemes held 50.98%, or Rs2.29 trillion. Money market funds remained the largest category at 44.76% of AUM, followed by income funds at 30.51% and equity funds at 15.16%. Resident individual investors held 41.5% of assets across 870,622 accounts, while other corporates accounted for 36.6%. Arif Habib Limited Head of Research Sana Tawfiq said the relatively low equity share of about 15% reflected several factors, including the interest rate environment and equity market performance. "Last year we still saw elevated interest rate levels, and even now the easing has been gradual," she said. She also pointed to the rise in unique identification numbers (UINs), which she said had reached around 680,000, with a significant retail component. "This is a healthy, encouraging sign that the equity market is also being considered now, and not just by mutual funds. On the retail side, we are seeing participation as well." Tawfiq added that KSE-100 companies had shown resilience, with profitability up around 24% to 25% in the first nine months. "Fundamentals are strong, and over the past two to three years the market has delivered double-digit returns, which has supported interest in UINs and broader participation. We are seeing more diversification rather than concentration, with individuals also becoming active." On the outlook for lower rates, she said a shift from fixed income into equity could be expected if rates are cut and uncertainty eases. "If any certainty comes on the geopolitical front, that will further boost equity participation." Former FPCCI secretary general Shahid Anwar described the Rs4.49 trillion figure as encouraging progress but stressed the need for greater economic impact. "The growing participation of individual investors and the increasing share of Islamic investment products are positive developments. However, from an economic perspective, the real challenge is to make this growth more inclusive and beneficial for the economy. The industry needs to attract more ordinary savers, encourage long-term investment and channel a greater share of domestic savings towards businesses and productive sectors." Responding to a question, he said around 75% of mutual fund assets are currently invested in money market and income funds, while equity funds account for about 15%, reflecting investors' preference for relatively safer and more predictable returns. The State Bank of Pakistan's recent increase in the policy rate to 12% also showed the interest rate outlook remained uncertain, he said. "A meaningful shift towards equities will depend on economic stability, corporate profitability, market confidence and better investor awareness. Lower interest rates alone cannot create a strong equity investment culture." AWT Investments Head of Equity Umair Naseer said the outlook for equity fund allocations depended heavily on geopolitics and oil prices. "If the trend in oil prices turns further downward, or if geopolitical risks, especially the Iran war, are de-escalated, then I think there could be a substantial increase in equity fund allocations." He noted fixed-income yields were currently around 11% to 12%, making equities more attractive if the inflation and oil outlook improved. "Our domestic economy is doing quite well this time. Despite global headwinds, Pakistan has performed very well. Reserves have gone to record levels, and credit ratings have improved. On the domestic front, there are no major hiccups. The only problems are international oil prices and the geopolitical situation." Naseer also pointed to the ease of digital conversion between fund categories as a factor that could support higher equity allocations when market conditions improve. On the Shariah side, he observed that mutual funds already show a higher share of Shariah-compliant assets, close to 50%, against around 20% to 30% for banks. "Given that new Shariah-compliant AMCs are emerging and there is a regulatory focus on expanding Islamic products, this trend will continue to grow. As investors see that Shariah-compliant returns and offerings are competitive and very close to conventional funds, they tend to prefer them."