KARACHI: Mahana Wealth, a technology-led investment management company, has secured $2.1 million in a pre-seed round, which was led by Swedish company VEF, SparkLabs Group of South Korea and Hong Kong and local strategic partner IGI Investments.

The startup’s initial investment came from Mattias Martinsson, founder of Tundra Fonder, a Swedish asset manager that has been a long-term investor in the Pakistani stock exchange.

Speaking to Dawn, Mahana Wealth CEO Muhammad Shamoon Tariq said the company is first-of-its-kind entity in Pakistan that’ll rely on digital advisory/execution and use digital on-boarding channels to reach out to potentially 50 million-plus working-class Pakistanis.

The startup will be different from a typical asset management company in the sense that it’ll launch its own products in addition to reselling the already existing mutual funds and exchange-traded funds (ETFs) being offered by other asset managers.

“We’ll be like Vanguard,” he said while referring to the American investment firm with $7 trillion in assets under management.

Vanguard is known for bringing low-cost mutual funds and ETFs from around the world to its platform where users get the option to invest in a wide variety of funds based on their risk appetite. “We’ll do handholding and help the customer make the best investment decision,” he said.

Mr Tariq claimed that more than half of the country’s population lives in debt and spends almost one-third of their monthly income on loan repayments.

He expects the company to roll out its products on a mass scale by October. The startup’s targeted customers are the general public as well as international investors.

The CEO said the company is keen on launching its own products. In particular, Mahana Wealth is focused on launching new ETFs — a basket of shares that investors can buy and sell on the exchange like a single stock. “It’s still too early to say, but I hope we’ll have four to five ETFs by the end of this year,” he said.

ETFs are a relatively new phenomenon in Pakistan. Four ETFs currently trade on the stock exchange, but they’ve gained little traction among ordinary investors. Major reasons for their low volumes include the alleged lack of enthusiasm on part of asset managers, which believe the popularity of ETFs will undermine their mutual fund business and lead to cannibalisation.

“We want to create a platform for digital on-boarding of clients. It’s secondary how many ETFs we launch. Our collective target should be on increasing the number of investors,” he said.

Pakistan is estimated to have roughly 250,000 individuals who invest directly in the stock market. That translates to an investor base of 0.02 per cent of the population versus 60pc for Sweden, which is the country of the startup’s main sponsors.

Mr Tariq didn’t state the valuation at which he’s raised $2.1m for meeting regulatory capital requirements.

Published in Dawn, August 24th, 2022