As many as 10 open-ended mutual funds (MFs) generated returns at double-digit rates between 11.9 per cent and 26.7 per cent in FY22, with investments concentrating on blue-chip stocks, according to EBL Securities.
The high incomes from investments were derived from dividends, interest income and capital gains at a time when there was no price restriction on stocks. The funds got the advantage of good dividends disbursed by securities, which had large allocations, for the year.
Of the mutual funds, LB Gratuity Opportunities Fund managed by Lanka Bangla Asset Management Company registered the highest return at 26.70 per cent for FY22.
Analyzing Lanka Bangla's portfolios, EBL found that the asset manager injected its biggest chunk of funds - 9 per cent -- into Bangladesh Submarine Cable Company Limited and Grameenphone, followed by Olympic Industries and Square Pharmaceuticals - 8 per cent.
The other top performing open-ended MFs of the year were managed by Capitec Asset Management, ACACIA SRIM, CWT Asset Management Company, ICB Asset Management Company, Assurance Asset Management, Asian Tiger Capital Partners, and Alliance Capital Asset Management.
The most preferred stocks of the fund managers included Bangladesh Submarine Cable Company (BSCC), Olympic Industries, Doreen Power Generations and Systems, Singer Bangladesh, Bangladesh General Insurance Company, British American Tobacco Bangladesh, Robi Axiata, and One Bank.
These stocks had 2-6 per cent allocations from the funds.
BSCC paid 46 per cent cash dividends for the year. Shareholders had opportunities of significant capital gains too from the stock as each share traded at Tk 186.30-Tk 243.90 in the fiscal year.
Olympic Industries traded at Tk 124 to Tk 211. Other preferred stocks of the MFs also offered scope of capital gains.
According to a study conducted in 2021, Bangladeshi mutual funds derived 26 per cent of income from dividends, 12 per cent from interest income, and the remaining 62 per cent from capital gains.
A senior official of EBL Securities, however, told the FE that capital gains could not be as high in FY22 as in FY21 since the market was in a downward trend in FY22.
"But there was no floor price in FY22, which went in favour of generating good returns," he added.
The securities regulator lifted the price restriction from all listed securities in June 2021. It was then re-introduced on July 28, 2022.
Some of the open-ended MFs, including the best performer managed by Lanka Bangla, invested in Beximco Green Sukuk that yielded 11.6 per cent for FY22.
If the funds' industry-wise allocation is considered, the fuel & power sector topped the chart, followed by bank, food & allied, engineering, and pharmaceuticals & chemicals sectors.
Overall, asset management companies of both open- and close-ended mutual funds preferred fundamentally-strong companies, including Renata, Square Pharmaceuticals, Grameenphone, BATBC, Beximco Pharmaceuticals, Marico Bangladesh and Bank Asia.
"Asset management companies have significant interest in the pharmaceutical and chemical industries due to potential growth prospects and stability," said EBL Securities.
The fund managers also had good faith in the business outlook of Grameenphone and BSCC.
CWT Asset Management Company injected 31 per cent of its funds, the highest among the top 10 performers, into the pharmaceuticals & chemicals sector, followed by telecommunication (20 per cent) and the fuel and power (17 per cent) sector.
One of its funds named CWT Emerging Bangladesh First Growth Fund secured 18.4 per cent return, gaining the fourth position on the list. The fund manager also invested in Beximco Green Sukuk.
If the average annulised return over the last five years is taken into consideration, CAPM Unit Fund managed by Capital and Asset Portfolio Management did the best.
The average annual return of the fund is 14.95 per cent between 2017 and 2022.
The five-year average annual return of Second ICB Unit Fund is 10.02 per cent while Peninsula AMCL BDBL Unit Fund One's is 9.96 per cent, Credence First Growth Fund's 8.89 per cent, and ICB AMCL Pension Holders' Unit Fund's 9.45 per cent.
Open-ended mutual funds have gained popularity due to policies intended to protect close-ended funds, such as distribution of re-investment units instead of cash dividends and extension of maturity periods, taken after the 2010-11 stock market debacle.
The close-ended MFs saw substantial erosions due to steep price corrections after the market crash.
The fund managers then found it hard to get sponsors of new close-ended funds and some funds remained undersubscribed.
Investors, however, showed interest in putting money in open-ended funds for the scope of liquidation at any time at prices close to net asset value.
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