Both the securities regulator and asset managers see Systematic Investment Plan (SIP) as a tool to help grow the mutual fund sector, with the scheme showing some success by bringing in funds from small investors.
The investment vehicle that encourages investors to set aside an equal amount of cash on a monthly basis for investing in MFs was introduced in 2017. Now, as many as 25 open-ended MFs are allowing savers to contribute monthly through SIP.
On the one hand, the scheme reduces investment risk, while on the other it provides investors with a handsome return that would otherwise be impossible from small investments.
The managing director of IDLC Asset Management, Rajib Kumar Dey said that after 2017 the fund manager had launched the product against all open-ended MFs and generated an annual average return of more than 8 per cent, excluding investment costs.
A fund manager has to put in extra efforts to manage small amounts of funds as the time and labour needed to handle an investor's account remain the same irrespective of the investment size.
"But there is no alternative to this approach and it's the right way that helped the neighbouring country's MF industry to see a robust growth," added Mr Dey.
Fund managers here felt encouraged to launch SIP, having seen how such tools supported an expansion of the mutual fund industry in India.
The number of SIP accounts in India has hit an all-time high of more than 65 million as investors have been keen on injecting money over an extended period of time, reported the Times of India. Fund managers there have recently experienced a monthly deposit of Rs 160 billion into the accounts of the SIPs.
Assets under management (AUM) in India reached Rs 46.58 trillion as of September and it is believed that SIP had played a big role in this.
The number of SIP account holders in Bangladesh still remains insignificant. But fund managers said they had been receiving increasing response from clients.
The vice chairman of Shanta Asset Management, Arif Khan said 70 per cent of their existing around 2,000 clients had SIP accounts, and 60 per cent of the SIP account holders had joined the scheme in the last one year.
"Our company has been able to see such a rise in SIP account holders after the strengthening of IT infrastructure, online ads, awareness programmes and manpower appointment."
Shanta Asset Management claimed that it had ensured annual average return of more than 10 per cent to their clients who had invested through SIP.
The enthusiasm around SIP has led to fund managers offering the investment option in a prospectus before submitting any proposal of open-ended MF to the Bangladesh Securities and Exchange Commission.
The regulator also in its consent letter insists on incorporation of the scheme in a bid to boost investor participation in the mutual fund.
The tenures of the SIPs launched by local fund managers are between two and five years.
IDLC Asset Management launched SIP for the first time in 2017 and now it collects fund using the tool against all of its four open-ended MFs. The SIP investment scheme is also available against three open-ended MFs of Shanta Asset Management and 15 MFs of ICB Asset Management Company.
Investors can inject money in monthly installments of at least Tk 1,000 or its multiples in these funds over a period of at least two years.
The return is high, as claimed by fund managers.
For example, an investor of HTML-ACME Employees' Unit Fund made an aggregate investment of Tk 42,000 between 2019 and 2021 by paying Tk 1,000 per month.
During the period, investor's asset value rose 32.58 per cent or Tk 13,684. The compound annual growth rate (CAGR) of the return derived from dividend and assets stood at 15.54 per cent at the maturity of the fund.
How investors, market reap benefits
To invest in an open-ended MF, an investor has to open an account with the fund manager for a minimum period set by the fund manager.
After opening the account, the investor deposits money into the account on a monthly basis. His fund is converted into units of that fund at a discounted unit price on the day of the deposit.
Normally 1 per cent discount is given for investing through SIP. This discount is not provided against MFs not offering SIP.
The saving system opens up an opportunity for investors to make good money out of small investments at a rate often higher than FDR (fixed deposit receipt) rates. The periodic investments also help the market by increasing liquidity flow and investor participation.
"SIP is a very good way of pulling retailers' funds by fund managers," said the spokesperson of the securities regulator, Mohammad Rezaul Karim.
Mr. Dey, of IDLC Asset Management, said, "It's not possible for an investor to minimise risk amid the market volatility. But the saving system reduces risk through diversification of the portfolio of a mutual fund."
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