MSF is an open-end mutual fund, which invests only in government securities, such as Pakistan Investment Bonds (PIBs) of various maturities. MSF is a strategic alliance between Arif Habib Investments and Habib Metropolitan Bank Limited, where the former is fund manager and the latter is trustee and sponsor of the Fund. This is the only fund in Pakistan, which provides investors an opportunity to invest in an underlying portfolio of zero default risk securities. The existing portfolio of MSF consists of 5 and 10 years PIBs, with an average duration of the portfolio close to 5 years.

MSF currently has two different tranches available. One of the sub scheme is invested in PIBs of different specific maturities. This tranche is maturing in December 2012. The active fund management is therefore restricted to the second tranche known as ‘perpetual’. The Fund started with tranches of 2003, 2005 and 2007 maturity, which have already matured

The Fund therefore gives investors an opportunity to choose a specific duration depending on their view on interest rates or rely on the fund manager by investing in the ‘perpetual’. MSF focuses on paying out potentially higher net returns as against the comparative yields available on government securities. At the same time, the perpetual tranche of the Fund aims at protecting the value of its portfolio against any adverse movements in interest rates.

Like other Unit Trust Schemes, most classes of investors would also achieve a high level of tax efficiency by investing through MSF in the government securities. The dividends paid by MSF are a taxable in the hands of the investor at the rates between 5%-10% (withheld at source). In the event an investor sells the units, the capital gain is tax-free in most cases.