ICB Capital Management has designed an investment product, in which individuals, institutions, and registered funds will be able to inject money to get, as it has forecast, an annual return of more than 8 per cent.
Anyone willing to make investments will have to open a BO (beneficiary owner's) account with the merchant bank and pay at least Tk 3,000 on a monthly basis for a period of three, or five, or seven, or 10 years or above.
Investments can go up by multiples of Tk 1,000.
The product named Term Investment Plan (TIP) has already been approved by the regulator this month and is set to be launched on Sunday.
It comes under discretionary portfolio management, meaning the broker will decide where to invest clients' money, without needing their consent, to attain the investment target.
TIP will also have features different from other discretionary portfolio management schemes. For example, transaction fee will be the least, said Mrs Mazeda Khatun, chief executive officer of ICB Capital Management.
The managing cost of clients' portfolios has been set at 1.90 per cent of the portfolio values at market prices, while it is 2.5 per cent for existing non-discretionary accounts managed by the company.
A special research team will be dedicated for the scheme to choose where to invest to make profits.
However, high return seems unlikely to achieve as the capital market has long been in the bear grip.
Some other merchant banks, including LankaBangla Finance, had launched similar products, but they later refrained from promoting the products due to market volatility.
To clear doubts about the success of TIP, Mrs Khatun said the company would adopt some strategies. Firstly, transaction fee will be kept at minimum and so speculation-driven frequent transactions will be avoided.
Secondly, TIP will have its large share of the funds gathered in fixed-income securities, such as Treasury bonds, which were not available in the secondary market at the launching of the previous products of similar nature.
"The fixed-income securities will help ICB Capital Management make TIP's operation viable," Mrs Khatun said.
The management fee will be deducted based on portfolio size. The portfolio manager will try to enhance the size of portfolios through investments in quality securities, she added.
Moreover, ICB Capital Management will be able to invest any portion of TIP in any kind of listed securities - bonds and stocks.
To prevent erosion of the clients' equity, 2 per cent of profits from each trade will be set aside for provisioning. The portfolios will be managed digitally and clients will avail of tax rebates.
At the end of each year, clients will be allowed to withdraw at least 70 per cent of the profits made using their portfolios.
On completion of the tenure of an investment scheme, the principal amounts and profits will be transferred to clients' bank accounts. Clients will also be able to extend the tenure of their investment schemes.
Apart from the head office situated in Dhaka, the branch offices of ICB Capital Management in divisional headquarters will provide the service.
Investments through TIP will be entitled to tax exemption as are the investments in the capital market.
Other discretionary products
IDLC Investments launched a similar product namely 'Easy Invest' in 2016, but its performance was not up to the mark.
A former managing director of IDLC Investments said the merchant bank had received good response from investors. But after the launching of an asset management company, IDLC AMCL, a subsidiary of IDLC Finance, IDLC Investments slowed down its campaign to promote the product considering that it falls into the category of assets managed by AMCs.
Market volatility was another reason as to why the issuer's enthusiasm fizzled out.
In 2018, LankaBangla Investments launched its discretionary product namely 'Nishchinto' with three years' tenure. Around 1,000 clients put their funds in it.
Chief Executive Officer of LankaBangla Investments Iftekhar Alam said those, who had initially made investments, received returns at above bank rates until 2022.
LankaBangla discontinued the product's promotion as the market dived. The number of accounts managed under Nishchinto has fallen to 150 on maturity of others.
LankaBangla Investments is now mulling over a new product of the kind.
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