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Subscription time extended further for first-ever ETF

FE REPORT | July 10, 2024 00:00:00

LankaBangla Asset Management is struggling to get subscribers of the country's first-ever Exchange Traded Fund (ETF) named 'LB Multi Asset Income ETF' amid a lack of interest shown by eligible investors.

The private placement subscription period has again been extended by two months until September 3, according to a stock exchange filing on Tuesday.

The first-time subscription period was from February 12 to March 3 this year. Having failed to draw not so many investors, the asset management company requested the securities regulator for an extension. Subsequently, the Bangladesh Securities and Exchange Commission (BSEC) granted an extension until June 3 this year.

Yet, the money collected so far from eligible investors falls far short of the minimum requirement to launch the ETF.

In December 2022, the BSEC approved the asset management company's (AMC) proposal to launch the ETF with an initial size of Tk 1 billion.

The target was to raise Tk 700 million from eligible investors (EIs) through private placement while the sponsor would contribute Tk 100 million, the AMC Tk 20 million, and the remaining Tk 180 million was set to be pooled through an initial public offering (IPO).

The fund could start its IPO (initial public offering) subscription and complete the subsequent listing on the Dhaka bourse if it could at least gather Tk 500 million from the EIs. In that case, the public portion would have been increased to Tk 380 million from Tk 180 million.

A lack of understanding about the new products is the main reason why the subscription is yet to be complete, said an official of LankaBangla Asset Management, requesting anonymity.

An ETF is a type of pooled investment from investors that operates much like a mutual fund and units of which are traded on an exchange just like stocks. It can be actively managed or passively managed.

In actively managed funds, portfolio managers decide which securities to invest in, while a passive ETF mirrors an index, with investments in all companies on the index in accordance with the weight of the companies on the index.

To diversify the country's stock market, the securities regulator finalised the rules of ETF in May 2017. A gazette on the rules was published in June of the same year.

LankaBangla Asset Management set the benchmark yield of the ETF as equivalent to the return from 10-year Treasury bonds.

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