Operations of mutual fund industry remain opaque

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Mohammad Mufazzal
Fund managers should intensify efforts to win back investors' confidence as prices of mutual fund (MF) units plunged, hit by restrictions on margin loan and private placement, officials and experts say.
They say that disclosure policy, campaign and change in investors' mindset can bridge the gap between investors and managers, which can help salvage the Tk 20 billion mutual fund industry from being collapsed.
"Investors need to change their mindset about investments in mutual funds," SEC executive director Anworul Islam said.
"In recent times, investors used to get higher prices at the start of the listing of mutual funds with bourses without cogent reasons. You can't expect windfalls immediately after the debut trading," Mr Islam told the FE.
His comment came at a time when at least four MFs are being traded in stock markets below their face value while fund managers are relentlessly pursuing permission for fresh funds.
Bangladesh has 30 closed-end MFs with a total size of Tk 19.56 billion. Besides, state-owned Investment Corporation of Bangladesh (ICB) and Prime Finance Asset Management are running three and one open-end MFs respectively.
Another high official of the SEC said the "performance" of fund managers will help alter investors' wrong perception about investment in MFs.
"Heyday (for MFs) is coming soon," the official said.
Professor Abu Ahmed, who teaches economics at Dhaka University, said investors have the right to know "how and where such funds are invested."
"It may not be possible to inform unit holders about the investment of MFs on a regular basis. What fund managers can do is to gather unit holders once or twice in a year to brief them about investment by MFs," Prof Ahmed, also a capital market expert, said.
The unit holders should also be informed about the management cost of MFs-part of the funds' disclosure policy, he added.
"We're in the dark about the portfolio value and dividend declaration of unit funds," Mithun Mahfuz, a unit holder, said.
He also said the amount of dividend offered by ICB Unit fund was "too meager".
ICB declared dividend of Tk 22 per unit on Unit Fund Certificate for the year that ended on June 30, '09.
An ICB official said the fund offered the dividend of Tk 22 per unit and the rest of dividend has been "reserved for safety reasons according to the securities rules."
Fund managers agree that there should be systematic campaign for investors' education and awareness, but also defended the non-disclosure policy for the sake of what they called "safety for investment."
"Share prices of the companies will be influenced if fund managers disclose how and where the funds are invested," a fund manager said.
"It's a place of serious competition. So the investment of an MF will be hampered if it discloses how and where the fund is invested," he added.
"Investors who have little time to deal with equity investment should invest in MF units," Yawer Syed, managing director and chief executive officer of AIMS First MF, said.
Mashrib Zahid, chief financial officer of RACE Asset Management, said, "If a mutual fund investor comes to us personally, we are ready to help out. The communication will strengthen their knowledge base."
Moin Al Kashem, managing director and CEO of Prime Finance Asset Management Company Ltd, admitted there was little campaign on the part of fund managers because of the cost involvement.
"We can't spend much on campaign and publicity. But we're now planning to disclose the information of our unit fund on the bill board," he said.