Mutual fund earnings fly as capital market rebounds

The mutual fund industry is performing well and recommending impressive dividends for unitholders as the capital market bounced back in the last fiscal year.

Market insiders say fund managers are seeing good earnings as they invested in undervalued stocks with high return potential. 

As a result, they were able to create confidence in the mutual fund industry last year. 

Besides, the net asset value (NAV) gap between the current market price and the cost of value narrowed in this fiscal year, insiders said.  

They further said confidence would grow gradually if fund managers properly disclosed investment and other related information to unitholders. 

Moreover, like others countries, mutual funds would become a safe investment tool for investors here, they added. 

The trustee committee of NLI First Mutual Fund has recommended a 17.5% cash dividend for unitholders for the period ending on 30 June 2021. 

The fund reported earnings per unit of Tk3.34 while the loss per unit was Tk0.76 in the same period of 2020.   

In this period, SEML FBLSL Growth Fund, SEML Lecture Equity Management Fund, and Asian Tiger Sandhani Life Growth Fund each recommended a 15% cash dividend for their unitholders.

Shahidul Islam, CFA, chief executive officer of VIPB Asset Management Company, said mutual fund managers had posted healthy profits, thanks to the capital market's better performance. 

He said fund managers had recommended cash dividends for unitholders, which was impressive for the mutual fund industry. 

Emran Hasan, chief executive officer of Shanta Asset Management, said mutual funds' performance largely depends on that of the capital market as a minimum of 60% of the funds need to be invested in the market as per the regulation. 

As the Dhaka Stock Exchange performed very well since the latter half of 2020, most of the funds performed similarly, he said. 

On top of that, some funds were managed very professionally and were invested in undervalued stocks with high return potential. Those funds performed even better than the market, he added.

Explaining further, he said, "When we say investors do not have high interest in this sector, that is true for closed-ended or listed funds. The reason investors have relatively low interest in such funds is doubts in asset qualities of some funds, risks of trading at a discount, which we have observed for many years, and no declaration of cash dividends." 

But many funds are performing well and investors have started recognising them, he added.  

"On the other hand, open-ended or non-listed funds are attracting many investors. These funds have some built-in benefits for investors, such as no risk of trading at a deep discount to NAV and dividend options as per investors' choice."

Also, as fund managers need to buy back the funds from investors, fund sizes will shrink if investors are not happy with the return, and this keeps fund managers under constant pressure to perform and serve better, he noted.

He further said mutual fund managers need to ensure superior risk-adjusted return for investors. 

Consistent higher returns than other conventional investment vehicles will build up trust eventually, he said. 

Along with strong client service, branding, and awareness of products, transparency and compliance will build up trust, he added.