Two big close-end mutual funds worth Tk 8.0 billion will hit the country's stock markets this year, increasing the depth of the market.
The mutual funds will be floated through joint initiatives of a number of financial institutions for the first time in Bangladesh.
The 'LR Global Bangladesh Mutual Fund One' worth Tk 3.0 billion is expected to make debut by April-May and another mutual fund valued at Tk 5.0 billion by this year-end in the bourses, a market source involved with the IPO floatation told the FE.
Market experts consider the mutual funds as risk-free tools in the stock trading.
The LR global will be the second largest in the country's stock markets while another to be floated jointly by some public sector banks and financial institutions will be the largest one. The Grameen One Scheme Two Mutual Fund amounting to Tk 1.25 billion until now is the largest mutual fund.
LR Global Bangladesh Asset Management Company, an affiliate of LR Global Partners, a US-based investment company, will manage the LR Global Bangladesh Mutual Fund One.
The five private financial institutions -- IDLC Finance Limited, LankaBangla Finance Limited, AB Bank, Prime Bank and Trust Bank-- will jointly float the mutual fund worth Tk 3.0 billion, sources said.
Of the total amount, some Tk 1.5 billion will be allocated for pre-IPO placement, Tk 1.0 billion for public and Tk 0.5 billion for sponsors, sources said. Per unit price of the mutual fund will be Tk 10.
The IDLC Finance, a local leading multi-product financial institution and merchant banker, has recently proposed the state-owned Investment Corporation of Bangladesh (ICB) to act as custodian and trustee for the mutual fund, he added.
A week ago, LR Global signed a memorandum of understanding (MoU) with IDLC Finance to allow the IDLC for obtaining placement, floatation advisory and brokerage services for the forthcoming mutual fund.
Process to float of another mutual fund worth Tk 5.0 billion is now at a very primary stage, another source said adding the state-owned financial institutions have agreed to float jointly the fund this year.
The five state-owned organisations are ICB, Janata Bank, Sonali Bank, Agrani Bank and Sadharan Bima Corporation.
"This is good news for the country's stock markets as it is always considered risk-free investment tools and one of the vehicles for the growth of the stock markets," said Salahuddin Ahmed Khan, former DSE chief executive officer.
Professionally managed, innovative and quality mutual funds will meet the growing demand of investors in the market, he added.
"For the interest of the market, the securities regulator should permit the mutual funds as early as possible to float and sponsor portion of the fund should also be utilised for formation of portfolio," said Khan, also a teacher of the finance department of Dhaka University.
Currently, a total of 16 mutual funds are listed with the bourses. Of them, ICB and its subsidiaries manage 12 mutual funds, AIMS Bangladesh three and BSRS one.
Mutual funds in the neighbouring countries of Bangladesh account for more than 40 per cent of the total market capitalization while in Bangladesh mutual funds contribute only three per cent of the total market capitalization.
Their combined issued capital of the mutual funds is worth $ 45 million or Tk 3116 million and their market capitalization is only three per cent or $ 230 million or Tk 15841 million.
