MFs fail to woo investors

Mohammad Mufazzal | Published: April 25, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

Most of the listed mutual funds (MFs) are being traded far below their face value of Tk 10 each and also below their respective net asset value (NAV) indicating a sorry state of the MF sector.
Some of the Asset Management Companies (AMCs) cited multiple reasons for the moribund state of MFs. The reasons include the interest rate fall in the money market and investors' perception about the MF sector.
Presently, there are 41 closed-end MFs listed with the two local stock exchanges. Of them, the eight first generation MFs managed by the Investment Corporation of Bangladesh (ICB) are being traded above their face value.
Out of the remaining 33, the units of 30 are being traded far below their face value and NAVs. Only three see their market prices above the face value, though marginally.
The three MFs are Grameen MF One, Prime Finance First MF and AIMS 1st MF.
According to information available from the Dhaka Stock Exchange (DSE), the market prices of the 30 MFs declined by 50.10 per cent-70 per cent of their respective NAVs until Thursday last.
Compared to other sectors in the stock market the MFs were now passing the worst time.
As of Thursday last seven out of 30 listed banks saw their shares traded below their respective face value. For the non-bank financial institutions (NBFIs), the figure stood at two against 23. In the food and allied sector, it stood at four against 18, in the textile sector three against 40 and in the travel and leisure sector one against four.
Unlike those sectors, 30 of the MFs witnessed their market prices far below their face value. Even some of the funds have seen the market prices fall by more than half the face value.
As of Thursday last the units of DBH First MF were traded at Tk 3.70. The fund's NAV was Tk 9.50 per unit on the basis of current market price and Tk 10.87 per unit on the basis of cost price.
The units of the ICB AMCL Third NRB MF having the NAV at Tk. 6.83 per unit on the basis of current market price and Tk 11.38 per unit on the basis of cost price were traded at Tk 3.90. Â
The NAV of First Janata Bank MF was Tk 10.60 per unit on the basis of current market price and Tk 11.26 on the basis of cost price. But the units of the MF were traded at Tk 4.10.
The NAV of the AB Bank 1st MF stood at Tk. 11.69 per unit on the basis of current market price and Tk. 10.95 per unit on the basis of cost price, but the units of the fund were traded at Tk 5.00.
The NAV of AIBL First Islamic MF was Tk. 9.83 per unit on the basis of current market price and Tk 10.87 per unit on the basis of cost price. The fund's units were traded at Tk 4.20.
The newly-listed Asian Tiger Sandhani Life Growth Fund units were traded at Tk 5.90 whereas the fund's NAV was Tk. 11.80 per unit on the basis of current market price and Tk 11.82 per unit on the basis of cost price.
The units of EBL First MF were traded at Tk 4.10, EBL NRB MF at Tk 4.10, Green Delta MF Tk 3.80, ICB 2nd NRB Tk 5.70, ICB AMCL 2nd MF 4.0, ICB Employees Provident MF1:Scheme1 Tk 3.9.2, ICB AMCL Sonali Bank Limited 1st MF 4.90, IFIC Bank 1st MF Tk 4.1, IFIL Islamic MF-1 Tk 4.90, LR Global Bangladesh MF One 3.70 and MBL 1st MF Tk 3.50.
On Thursday, market prices of some of such MFs declined up to 70 per cent of their NAVs calculated based on cost prices.
The units of NLI First MF were traded at Tk 8.0. The units of Phoenix Finance 1st MF, PHP First MF and Popular Life First MF saw their market prices at Tk 4.0, Tk 4.0 and Tk 4.10 respectively. Â
The units of Prime Bank 1st ICB AMCL MF, Reliance One, Southeast Bank 1st MF and Trust Bank 1st MF were traded in the range between Tk 3.90 and Tk 8.10.
An official of a leading AMC said most of the MFs, barring some first generation ones, were floated during the period when the then DSE benchmark index DGEN ranged between 7,500 and 8,500 points.
He said the main problem is the investors mix up the MFs with shares. They are yet to understand when the units of MFs should be purchased. Though the market prices of units have fallen far lower than the face value, the investors still choose to wait.
"The index (DSEX) is presently below 4,500 points. The portfolios of the MFs have also shrunk accordingly as the shares were purchased during the bullish trend of the market in 2009 and 2010," the official said on the condition of anonymity.
He said now it is the perfect time to launch an MF in the market as the market prices of listed securities have declined significantly.
Previously, AMCs had a provision for investing 75 per cent of an MF in the capital market and the remaining 25 per cent in the money market.
Later, the regulator relaxed the provision allowing AMCs to invest 40 per cent of MFs in the money market.
The regulator has also kept a quota of 10 per cent of any IPO (initial public offering) for the MFs.
"Nevertheless, the investors are still lukewarm about the MFs. Non-professionalism of some of the AMCs is also another reason for the present state of the MF sector," said a senior official of the securities regulator on the condition of anonymity. The regulator recently took punitive measures against an AMC for "weakening" its MFs by breaching securities rules.
Moin Al Kashem, managing director of Prime Finance Asset Management Company, said sufficient incentives are given for the MFs.
"Investors are not investing in MFs even at a price far below their face value. So, the lack of investor awareness is the main reason for the ongoing situation," said Mr. Kashem. He however, added that it would take time to earn the investor confidence in the MFs.
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