A great asset class for risk-averse investors -I

Bangladesh is one of the fastest growing economies of the world. As per a Bloomberg report, Bangladesh is stated to be on a track to be a trillion dollar economy by 2040. In contrast, the MAC (middle and affluent class) people are growing and they are sometimes struggling to find the best way to invest their surplus funds. Having very limited options for investment, they mostly invest their funds in banks and NBFIs in the form of term deposits. Some of them invest in the capital market and cannot make good return due to various reasons. As real estate is not a liquid asset class, it doesn't serve their purpose accordingly. Other investments such as gold are also not that convenient for investment in Bangladesh because of its discounted value at the time of sale. In order to cater to diversification and maximizing returns, the Bangladesh Bank and the Securities & Exchange Commission have introduced Govt. Treasury Bond, a risk-free instrument, for the investors. Unlike Sanchayapatra's maximum investment threshold, there is no investment ceiling for this asset class. Anyone can invest any amount starting from Tk 100 thousand and so on. Investing in listed T-Bond is allowable for tax rebate up to 15 per cent in Bangladesh.
Currently, Government Securities (G-Sec) market of Bangladesh consists of both listed and non-listed securities. Tradable securities include T-Bills (Treasury Bills) and BGTBs (Bangladesh Government Treasury Bonds). T-Bills are of 91, 182 and 364 days of maturities and Treasury Bonds are of 2, 5, 10, 15 and 20 years of maturities. Treasury Bonds are coupon-bearing debt instruments where coupons are paid semiannually and the principal amount is repaid on maturity. At present, any investor can invest in the said T-Bill and bond instruments through discretionary fund managers. Interestingly, unlike a savings scheme, T-bonds can be sold partially to meet the immediate need for liquidity for an investor. If the fund is invested through a fund manager, there is no excise duty and 5 per cent AIT is applicable instead of 10 per cent charged by banks or NBFIs on their savings schemes. However, there is an ample chance of capital gain or loss, if the bond yield fluctuates and the instrument is settled before maturity. In case of the rate increase, the investor may face capital loss, if it is settled early prior to maturity and vice versa. One of the most significant advantages of Treasury bonds is their unparalleled safety. Issued and backed by the government, these bonds are considered virtually risk-free. The full faith and credit of the government stand behind these securities, making them a stable and secure investment option. If you're a risk-averse investor looking for a safe haven in times of economic uncertainty, Treasury bonds offer the peace of mind. It provides fixed interest payments at regular intervals. Investors can rely on this predictable income stream, making them an attractive option for those seeking stable returns. This predictability is especially valuable for retirees who depend on a steady source of income to cover living expenses. In addition, it acts as a counterbalance to riskier assets, such as stocks. When the stock market experiences volatility, Treasury bonds often remain stable, helping to reduce the overall risk in a portfolio.
Possibly now is the high time for the investors of Bangladesh to consider this asset class and take investment advice from their financial advisors as necessary.

Abul Ahsan Ahmed is Head of Portfolio Management, IDLC Investments Limited.
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