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Bangladesh - January 29, 2022

Mutual funds failed to achieve investors’ trust

Most funds trading under NAV

Mahfuja Mukul: Investors in the stock market are not interested in mutual funds. As a result, the prices of mutual funds have remained at that bottom. Mutual Fund of only 2 companies are at good condition. All other prices are below the net asset value (NAV). Experts say this picture of the mutual fund is unusual.
Mutual funds are in such dire straits, they say, due to the incompetence of asset managers and a lack of investor awareness. This picture is not good for the overall stock market. Because if the mutual fund is not strengthened, the foundation of the stock market will not be strengthened. Therefore, in the interest of the overall stock market, the mutual fund sector must be strengthened. They also say that the price of a mutual fund can be 10 percent lower or higher than the NAV.
But it is not uncommon for the price of a mutual fund to be 40 to 50 percent lower or higher than the NAV.
A review of the data shows that only two of the mutual funds traded on the stock market have prices above the NAV. Of these, the price of Prime Finance First Mutual Fund is Tk 20.30. The NAV of this fund is Tk 18.79. In other words, the price of the fund is 22 percent higher than the NAV. The fund has paid a cash dividend of 8% in the last financial year.
CAPM IBBL Islami Mutual Fund, which is above NAV at the current market price, is priced at Tk 15.90. The NAV of the fund is Tk 12,74. In other words, the price of the fund is 25 percent higher than the NAV. In the last financial year, the fund paid a cash dividend of 13.50% to the investors.
With the exception of these two mutual funds, the current market price of the rest is much below the NAV. Mutual funds are being sold for less than half of the NAV.
At present, First Bangladesh Fixed Income Fund is in the most devalued position. The market price of this fund is Tk 5.50. The NAV of the fund, which paid 4 percent cash dividend in the last financial year, is Tk 11.7. That means the fund is being sold at a 54 percent lower price than the NAV.
The list also includes AB Bank First Mutual Fund, IFIC First Mutual Fund, PHP First Mutual Fund, Popular Life First and Trust Bank First Mutual Fund.
Of these, AB Bank First Mutual Fund paid a 6% cash dividend to investors in the last financial year. The NAV of this mutual fund is Tk 11.63. But the fund is transacting at Tk 5.60. In other words, the price of the fund is 51 percent lower than the NAV.
IFIC’s first mutual fund is being sold at 51 percent lower than the NAV. The NAV of the fund, which paid a cash dividend of 8.5 per cent in the last financial year, is Tk 11,35. But the market price is Tk 5.60.
The market price of PHP First Mutual Fund is Tk 5.60. The NAV of the fund, which paid a cash dividend of 8.5 per cent in the last financial year, is Tk 11.52. In other words, the fund is being sold at 51 percent lower price than NAV. Popular Life First Mutual Fund paid investors a cash dividend of 6.5 percent in the last fiscal year. The fund has a NAV of Tk 11.36 and the current market price is Tk 5.50. This fund is also being sold at 51 percent lower price than NAV.
Trust Bank First Mutual Fund is being sold at 50 per cent lower than the NAV. The fund, which paid investors a 9 per cent cash dividend in the last financial year, had a NAV of Tk 11.7. But the market price of the fund is Tk 5.90.
Regarding the picture of mutual funds, a member of the Dhaka Stock Exchange said that in the past there have been various irregularities in mutual funds. The funds failed to pay good dividends to investors. That is why investors have lost confidence in mutual funds. Investors are still not interested in mutual funds even after paying good dividends. The stock market is also running item dependent. Investors are trying to make 20 to 30 percent profit in a week.
And those who are playing with items are not investing in mutual funds. This is one of the reasons why mutual funds are at the bottom.
AB Mirza Azizul Islam, former chairman of the Bangladesh Securities and Exchange Commission (BSEC), told that it is not right for a mutual fund with a dividend of 10 to 15 per cent to be traded between Tk 6 and Tk 7. It’s unusual. In fact, investors have lost confidence in mutual funds.
“I don’t think mutual funds are doing too badly,” he said. However, there is a lack of awareness among investors. So, there is a need to raise awareness among investors through various trainings. They should be made aware of the benefits of investing in mutual funds.
Faruk Ahmed Siddiqui, another former chairman of BSEC, told that the problem of mutual funds is not new, it is a problem of last 10 years. There could be several reasons for this. First, it is not possible to make a quick profit. And those of us who are investors want a quick profit. Want profit in three days. Our investors want today the price is Tk 10, after three days it will be Tk 13, you will get 30 percent profit. It does not happen in mutual funds. I think this is one of the main reasons why investors do not go to mutual funds.
Number two, mutual funds have a time frame. Mutual funds should be terminated within that time frame. If it is extended again in different forms, the market price from NAV will be less. I think the size and timing of mutual funds should remain unchanged. We are compromising in these places. Added this stock market analyst. The third problem, he said, was that mutual funds were flocking to the high market, which had initially eroded investor confidence. Again, they (mutual fund asset managers) do not have skilled manpower and have various problems.
He added that investors in other countries invest through mutual funds. But in our country, it is not. Mutual funds must be strengthened. If the mutual fund is not strong then the real investors will not be interested. Mutual funds must play a role in making the stock market strong and stable. Mutual funds are not able to play that role. It is important to think about how to strengthen it.

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