Delay in approval of new proposals to hinder MF industry growth

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MFs are necessary to minimise the risks of the small investors and reduce the market volatility as they are managed by professionals.
The mutual fund industry in Bangladesh is among the fastest growing financial services. During the last two years, 10 out of the total 12 asset management companies began operation.
A mutual fund is a portfolio, or collection, of individual securities (some combination of stocks, bonds, or money market instruments) managed according to a specific objective spelled out in the fund's prospectus. A mutual fund pools investors' money and invest the same in securities on their behalf.
As per the mutual fund rules, a full and complete application is to be consented by the commission within 30 days. "Therefore, micromanagement attempted by the ministry of finance undermines the authority of the SEC and its rules," said another expert.
On the question whether there are too many mutual funds coming to the market in Bangladesh, a study by Argus Research, a capital market research organization, shows that mutual fund assets in the neighbouring countries like India and Pakistan account for more than 14 per cent and 9.0 per cent respectively of the total market capitalization of those countries. While in Bangladesh, mutual funds' share in the total market capitalization is only 1.0 per cent.
Statistics show that that the mutual fund industry's growth has not kept pace with the growth of the market capitalization in Bangladesh; from 2006 to 2009 mutual fund asset have declined from 1.6 per cent to 1.0 per cent of overall market capitalization.

"Between 2006 and 2009 the share of the mutual fund industry has declined from 1.6 per cent to only 1.0 per cent in the overall market capitalization of DSE," the study said.
Therefore the data does not support the common perception that the mutual fund industry is becoming too large too fast. Actually, the opposite has taken place, it added.
The proposed mutual funds awaiting the SEC approval include, IDLC First Mutual Fund, BGIC First Mutual Fund, Reliance Insurance Mutual Fund, Prime Finance Second Mutual Fund, Rupali Life Insurance MF, SIBL First Mutual Fund, Northern General Insurance First Mutual Fund, Prime Finance Open End Mutual Fund, IFIC First Mutual Fund, EBL NRB Mutual Fund, People's Life Insurance Mutual Fund, Janata Bank First Mutual Fund, AB Bank Client Mutual Fund, Trust Bank NRB Mutual Fund and PHP First Mutual Fund.
Currently, a total of 19 mutual funds are listed with the bourses with their combined issued capital of Tk 4816 million.