Mutual funds in Pakistan reduced their exposure to equities in February 2026 as market volatility weakened investor confidence, according to a report by Arif Habib Limited.

Equity assets under management (AUMs) dropped 9 percent month-on-month to Rs678 billion, reflecting a cautious shift by fund managers amid uncertainty in the stock market. Despite the decline in equity investments, the total mutual fund industry AUM remained largely stable at Rs4.31 trillion during the month.

The report noted a noticeable change in investment strategy, with funds redirecting capital toward relatively safer instruments. Debt investments increased by 2 percent month-on-month to Rs3.63 trillion, accounting for about 84 percent of total industry assets, while equities made up roughly 16 percent.

Among asset managers, Al Meezan Investment Management Limited maintained its position as the largest player with Rs648 billion in total AUMs. It was followed by NBP Fund Management Limited with Rs519 billion and MCB Investment Management Limited with Rs404 billion. In the conventional equity category, National Investment Trust Limited held the largest equity portfolio at approximately Rs91 billion.

The report also highlighted the high concentration of mutual fund investments in a relatively small number of listed companies. The top 30 stocks represented 63.2 percent of total equity AUMs, equivalent to about Rs428 billion.

Key holdings included major companies such as Oil and Gas Development Company Limited, Fauji Fertilizer Company Limited, Pakistan State Oil Company Limited, and Pakistan Petroleum Limited.

In terms of participation, OGDC was the most widely held stock, with 89 mutual funds investing in it. It was followed by Lucky Cement Limited with 85 funds and Fauji Fertilizer with 82 funds. Meanwhile, mutual funds collectively owned about 42.7 percent of the free float of Pakistan State Oil.

Analysts say the reduction in equity exposure reflects a defensive stance by asset managers amid volatility in the Pakistan Stock Exchange and global uncertainty driven by geopolitical tensions and fluctuations in commodity prices. However, the continued focus on large, fundamentally strong companies suggests that funds are still maintaining strategic exposure to core sectors such as energy, banking, cement, and fertilizers.