The impact of regulatory decision regarding liquidation or conversion of closed-end mutual funds (MFs) into open-end ones is yet to be visible in the capital market.
The units of the majority number of closed-end MFs are being traded well below their face values.
Many Asset Management Companies (AMCs), however, are expecting a 'positive' impact of liquidation or conversion of closed-end MFs on the market.
After delisting of four closed-end MFs, which will be liquidated or converted into open-end ones, there remain 40 closed-end MFs listed on the bourses.
According to information of the Dhaka Stock Exchange (DSE), except eight closed-end MFs managed by the ICB, the units of 32 MFs presently are being traded below their face value of Tk 10 each.
As per the directive of Bangladesh Securities and Exchange Commission (BSEC), the conversion of AIMS First Guaranteed MF and Grameen One, the first scheme of Grameen Mutual Fund One, managed by AIMS, is now under process.
Concerned officials said sales of assets have almost been completed and audit job is going on to submit accounts of these closed-end MFs to the securities regulator.
On the other hand, 1st ICB MF and 2nd ICB MF, managed by the Investment Corporation of Bangladesh (ICB), have already been converted into open-end ones as per unit holders' decision.
The conversion process of 3rd ICB MF is also under process.
Shahidul Islam, managing director of VIPB Asset Management Company, said investor's confidence in the market is low at the moment. In the case of MFs, the same is even lower.
He said investors' confidence in MFs is shallow due to poor performance of the funds and lack of accountability on the part of the AMCs.
"Earlier, unit holders were unable to realise their returns from the closed-end MFs as per NAV," Mr Shahidul said.
He said the liquidation of two closed-end MFs has paved the way for liquidation or conversion on completion of the tenures of MFs.
"General investors will be attracted to MFs when the unit holders' investments and profits will be deposited into their accounts as per NAV," Mr Shahidul added.
Shaikh Kamruzzaman, chief executive officer (CEO) of Zenith Investments, said liquidation of the closed-end MFs is the first signal to restore investors' confidence.
"I think, a disaster could have happened if the regulator failed to stick to its position in completing liquidation of MFs on completion of tenure," Mr Kamruzzaman said.
He said, 'real' investors now will get back their confidence on MFs and general investors will also follow them in making investments in MFs.
When asked, the officials of the AIMS Bangladesh refused to make any comment terming the issue as 'sub-judice'.
Earlier on June 29, 2015, the Bangladesh Securities and Exchange Commission set fresh deadlines for conversion or liquidation of the closed-end MFs, which earlier had crossed 10 years, managed by the ICB and the AIMS Bangladesh in accordance with the decision given by three-fourths unit-holders.
On December 15, 2015, the High Court (HC) declared the BSEC directive on closed-end MFs 'illegal', asking the relevant parties to maintain status quo.
The HC order came on a writ petition filed by Ali Zaman, a unit-holder of a MF.
On February 11, the Supreme Court (SC) stayed the HC verdict along with lifting of the status quo following the BSEC petition and the regulator continued its move to implement its directive.
Later, three petitions were also filed seeking stay order on the regulator's order and on March 2, the SC passed 'No order'.
The lawyer said another hearing will be held on March 29.
The BSEC lawyer said the liquidation or conversion of closed-end MFs into open-end ones will continue as the securities regulator's decision prevails in legal battle up to the highest court.
As per BSEC guideline, the ICB will have to complete the conversion or liquidation of 3rd ICB MF, 4th ICB MF, 5th ICB MF, 6th ICB MF, 7th ICB MF and 8th ICB MF by taking unit holders' consent at a special meeting.
Nazrul Islam, CEO of ICB AMCL, said it's positive as the liquidation or conversion of closed-end MFs has started as per the rules.
"It will be positive for the sector if the investors are able to realise their investments and profits as per NAV after conversion or liquidation of the funds," Nazrul Islam said.
When contacted the BSEC officials said investors will get a clear idea about NAV and the tenure of closed-end MFs along with realising accrued benefits from their investments.
"It's also a message for AMCs and unit holders that closed-end MFs are liquidated or converted after completion of their tenures," a BSEC official said.
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