f-504(fixed income securities).pptx

7/26/2019 F-504(Fixed Income Securities).pptx

http://slidepdf.com/reader/full/f-504fixed-income-securitiespptx 1/50

BASICS OF MUTUAFUND



PRESENTED TO…..

Shabbir Ahmed

Professor

Department of FinanceFaculty of Business Studies

University of Dhaka



What is a Mutual Fund: Mutual Funds are trusts which pool refrom large number of investors who share a common nancial goal through is

for investments in capital market instruments such as shares! debentures andmoney" market instruments such as commercial papers! certicate of deposittreasury bonds# #$t is the most suitable investment for the cautious investor aan opportunity to invest in a diversied professionally managed basket of secrelatively low cost#

Who an in!"st in Mutual Funds: Anybody with an inv

surplus of as little as a few thousands can invest in mutual funds by buying uparticular mutual fund scheme that has a dened investment ob&ective and s



#OW MUTUAL FUND WOR$S:

• The money collected from the investors is invested by a fund manager in differentsecurities.

• These could range from shares and debentures to money market instruments depend

the scheme’s stated objectives.

• The income earned through these investments and capital appreciation realized by th

are shared by its unit holders in proportion to the units owned by them

Figure: How does a mutual fund work



CLASSIFICATION OMUTUAL FUND



1. Functional Classification

• Open ended funds: In an open ended scheme, the investor can make ent

any time. lso, the capital of the fund is unlimited and the redempti

indefinite.• Close ended funds: in a close ended scheme, the investor can buy into

during Initial !ublic offering or from the stock market after the units hav

The scheme has a limited life at the end of which the corpus is li"

investor can make his exit from the scheme by selling in the stock mar

expiry of the scheme or during repurchase period at hi

There are three different types of classification of mutual funds.

#$% &unctional

#'% !ortfolio

#(% )wnership



'# Portfolio (lassication)

Equity Funds• Growth Funds: They seek to provide long term capital appreciation to the inv

best to long term investors.

• Aggressive Funds: They look for super normal returns for which investment i

start*ups, I!)s and speculative shares. They are best to investors willing to tak

• Incoe Funds: They seek to maximize present income of investors by investistocks paying high cash dividends and in high yield money market instrument

best to investors seeking current income.

• !alanced Funds: They are a mix of growth and income funds. They buy shar

and bonds for income and best for investors seeking to strike golden mean.



"E!# F$%"&

•!ond Funds: They invest in fixed income securities e.g. government bonds, codebentures, convertible debentures, money market. Investors seeking tax free in

in for government bonds while those looking for safe, steady income buy gover

bonds or high grade corporate bonds. lthough there have been past exceptions

funds tend to be less volatile than stock funds and often produce regular income

these reasons, investors often use bond funds to diversify, provide a stream of

or invest for intermediate*term goals. +ike stock funds, bond funds have risks a

make or lose money.

• Gilt Funds: They are mainly invested in overnment securities.



&'ECIA( F$%"&

• Inde) Funds: -very stock market has a stock index which measures the upward and downw

stock market. Index &unds are low cost funds and influence the stock market. The investor w

the market delivers.

• International Funds: mutual fund located in home country to raise money in home c

globally.

• Offshore Funds: mutual fund located in home country to raise money globally for investi

• &ector Funds: They invest their entire fund in a particular industry e.g. utility fund for

power, gas, public works.

• *oney *ar+et Funds: These are predominantly debt*oriented schemes, whose main obje

of capital, easy li"uidity and moderate income. To achieve this objective, li"uid funds inv

safer short*term instruments like ommercial !apers, ertificate of /eposits, Treasury 0ills



%.OWNERS#IP CLASSIFICATION:

• !ublic 1ector 2utual &unds3 These are sponsored by a company of the public sector. &or ex

Investment orporation 0angladesh’s I0 4nit ertificate , I0 2+ 4nit ertificate etc

• !rivate 1ector 2utual &unds3 These are sponsored by a company of the private sector. &or exPrime Finance Unit Fund ! A$MS First *uaranteed Mutual fund etc#

• &oreign 2utual &unds3 &oreign 2utual &unds are sponsored by companies for raising fundhome country! operate from and invest in home country#



$E& PLA&ERS IN MUTUAL FUND

Mutual Fund is formed by a trust body# +he business is set up by tthe money invested by the asset management company and the

monitored by the trustee# +here are ve principal constituents

market intermediaries in the formation and functioning of mutual f

P'ini(al onstitu"nts

,# Sponsor'# Asset Management (ompany-# +rustee.# Unit /older0# Mutual fund

Ma')"t Int"'*"dia

,# (ustodians'# +ransfer Agents-# Depository



S(onso'Basically sponsor is an underwriting company that o%ers shares in ifund# Acting like an underwriter! this company must sponsor a mutufor investor to have access to it# +here has to be a promoter of the c

Sponsor is a bank! nance or insurance company or statutory organwhich singly or &ointly can form a mutual fund with another bank! ninsurance company! statutory organisation recognised registered trpension fund! provident fund# +here may be single or multiple sponsfund#Ass"t Mana+"*"nt Co*(an,-AMCAn entity registered under the (ompanies Act to manage the monethe mutual fund and to operate the schemes of the mutual

regulations# $t carries the responsibility of investing and managing tmoney# Professional money managers are appointed by the asset mcompany to take care that the investor1s amount are invested securities based on the risk tolerance level of the investors and accmutual fund scheme# +he AM( typically has three departmenManagement 2b3 Sales 4 marketing 2c3 5perations 4 Accounting#



Mutual FundA mutual fund established under the Act to raise money through thto the public for investing in the capital market# +he funds thuspassed on to the Asset Management (ompany for investment#

Unit #old"' A person6entity holding an undivided share in the assets of a mutua

scheme#

T'ust"" +he trustee holds the property of the mutual fund for the benet of holders and looks into the legal re7uirements of operating and func

mutual fund# +he trustees have the duty to monitor the actions of thensure compliance with the regulations and to see that the decisioAM( are not against the interests of the unit holders#



CustodianA custodian is a person6entity who has been granted a (erticate of 8econduct the business of custodial services under regulations#$t bears the

various schemes of the fund in its places# Mutual funds re7uire custodians can concentrate on areas such as investment and management of money

T'ans/"' A+"ntsA transfer agent is a person who has been granted a (erticate of 8egistraconduct the business of transfer agent #+ransfer agents1 services include issredemption of mutual fund units! preparation of transfer documents and m

updated investment records# +hey also record transfer of units between invwhere depository does not function#

D"(osito',A depository is corporate body who carries out the transfer of units to the demateriali9ed form and maintains records thereof#

MAR$ET INTERMEDIARIES



Ad!anta+"s o/ *ut



P'o/"ssional Mana+"*"nt0 +he funds are managed by skilled and profee:perienced managers with a back up of a 8esearch team

Di!"'si1ation0 Mutual Funds o%er diversication in portfolio which reduces

Con!"ni"nt Ad*inist'ation0 +here are no administrative risks of share trmany of the Mutual Funds o%er services in a Demat form which save investor

delay#

#i+h"' R"tu'ns0 5ver a medium to long"term investment! investors always returns in Mutual Funds as compared to other avenues of investment# /oweveshould be cautioned that such high returns riding on the $+ boom should not b

regular returns and therefore one should look at the average returns provideMutual Funds particularly in the e7uity schemes during the last couple of

Lo2 Cost o/ Mana+"*"nt0 ;o Mutual Fund can increase the cost beyond plimits of '#0< ma:imum and any e:tra cost of management is to be borne by



Li3uidit,0 $n all the open ended funds! li7uidity is provided by direct salby the Mutual Fund and in case of close ended funds! the li7uidity is prov

the units on the Stock =:change#

T'ans(a'"n,0 All the Mutual Funds disclose their portfolios on a half

/owever! many Mutual Funds disclose this on a 7uarterly or monthly investors# +he ;A>s are calculated on a daily basis in case of open ended

published through the newspapers#

Eono*i"s o/ sal"0 +he 1pooled1 money from a number of investors mutual funds en&oy economies of scale# $t is cheaper compared to invest

the capital markets which involves higher charges#

Fl"4i5ilit,0 +here are a lot of features in a regular mutual fund scheme!

?e:ibility to the scheme# +he wide range of schemes being launched mutual funds also provides an added ?e:ibility to the investor to plan h

accordingly#

Oth"' B"n"1ts0 Mutual Funds provide regular withdrawal and systemaplans according to the need of the investors#



D'a25a)s o/ *utu



S"l"tion o/ P'o("' Fund 0 $t may be easier to select the right share rathe right fund# For stocks! one can base his selection on the parameconomic industry and company analysis# $n case of mutual funds! past per

is the only criteria to fall back upon# But past cannot predict the futu

Di!"'si1ation 0A mutual fund helps to create a diversied portfolio# +diversication minimi9es risk! it does not ensure ma:imi9ing returns# +he re

mutual funds o%er are less than what an investor can achieve# Fo' "4a*single security held by a mutual fund doubles in value! the mutual fund its

not double in value because that security is only one small part of the fholdings# By holding a large number of di%erent investments! mutual fund

do neither e:ceptionally well nor e:ceptionally poorly#T'ans/"' Di6ulti"s 0 (omplications arise with mutual funds when a m

portfolio is switched to a di%erent nancial rm# Sometimes the mutual funhave to be closed out before a transfer can happen# +his can be a ma&or p

investors# i7uidating a mutual fund portfolio may increase risk! increasecommissions! and create capital gains ta:es

Ta4"s 7 hen making decisions about investor1s money! fund managers doconsider his6her personal ta: situations# Fo' "4a*(l": when a fund managsecurity! a capital gain ta: is triggered! which a%ects how protable the indfrom sale# $t might have been more protable for the individual to defer the gain liability#

EVALUATING PERFORMANCE OF MU



EVALUATING PERFORMANCE OF MUFUND

Net Asset Value (NAV): It is the amount which a unit holder wou

the mutual fund were wound up. An investor in mutual fund is aof all its assets and liabilities. Returns to the investor are determ

interplay of two elements Net Asset Value and Costs of Mutual F

ma!or aspects need to be hi"hli"hted. hey are#

• It is the net value of all assets less liabilities. NAV rep

mar$et value of total assets of the Fund less total liabilities

to those assets• NAV chan"es daily. he value of assets and liabilities ch

NAV today will not be NAV tomorrow or day later.• NAV is computed as a value per unit of holdin".



VALUATION RULE:

Nature of Asset Valuation Rule

%i&uid Assets e.". cash held As per boo$s.

All listed and traded securities'other than those held as not for sale(

Closin" Mar$et )rice

*ebentures and +onds Closin" traded price or yield

Illi&uid shares or debentures

%ast available price or boo$ valuwhichever is lower. ,stimated Mapproach to be adopted if suitabbenchmar$ is available.

Fi-ed Income ecurities Current /ield.



NETTING AET VALUE:A!!itions De!u"tions for Lia#ilities

Di$i!en!s an! Interest a""rue! E%&enses a""rue!

Ot'er re"ei$a#les "onsi!ere! oo! Lia#ilities toar!s un&ai! asse

Ot'er assets (one! assets) Ot'er s'ort ter* or lon ter* l

Computation of Net Asset Value 'NAV(#

Net Assets of t'e "'e*e 0 Mar$et value of investments 1 Receivables 1 2ther acc

1 other assets 3 Accrued ,-penses 3 2ther )ayables 3 2ther %iabilities



ILLUTRATION: Parti"ulars Amount (in lakhs)

Listed Shares at cost (ex-dividend) 20.00

Cash in hand 1.23

Bonds and e!entures at cost ".30

#$ these% Bonds not listed and &uoted 1.00

#ther $ixed interest securities at cost ".'0

ividend accrued 0.0

Amounts a*a!le on shares +.32

,xenditure accrued 0.'

um!er o$ /nits ( 10 .. each) 2%"0%000

Current realia!le value o$ $ixed income securities o$ .. o$ 100

10+.'0

Based on the above data, determine the NAV of a Regular

Income Scheme



OLUTION:Des"ri&tion of Asset+Lia#ilities

at "ost

A!,ust*ent Value (In la-'s)

E.uit/ s'ares Inde- '454675466( 8 46 01

Cas' in 'an! +oo$ Value 35on!s an! De#entures not liste! +oo$ Value 3

5on!s an! De#entures liste! Mar$et Value 1

Di$i!en!s a""rue! 6

Fi%e! In"o*e e"urities MV '569.:67566 8 ;.:6( 829

u# Total Assets (A) 87231

Less : Lia#ilities ;

6

Due on s'ares E%&enses Pa/a#le Accrual +asis

u# Total Lia#ilities (5) 9

Net Asset Value (A) < (5) 8326

4=86=

39Units un!er t'e s"'e*e Number

Net Asset Value Per Unit



COMPUTATION OF RETURN:

Investors derive three types of income from ownin" mutual fund units#

• Cash *ividend

• Capital <ains *isbursements

• Chan"es in the fund=s NAV per unit '>nreali?ed Capital <ains(

For an investor who holds a mutual fund for one year@ the one3year holdin" per

should be the followin"#

Di$i!en! > Reali?e! Ca&ital Gains > Unreali?e! Ca&ital Gains+5ase Net As



ILLUTRATION:

A mutual fund, that had a Net Asset Value of 10 at the beginning of the m

income and capital gain distribution of 0.05 and 0.04 per unit respectively month and then ended the month with a net asset value of 10.0. !ompu

monthly return.

olution#*5 0 6.6:

C<5 0 6.6;

>nreali?ed Capital <ains 0 NAV5 NAV6

056.6B 56.660 .6B

Monthly Return 0 '6.6: 1 6.6; 1 6.6B( 7 56 8 566

0 5.4.



@OLDING PERIODIC RETURN

A simple but effective measure of performance is to describe mutual fund retur

the followin" three ma!or sources#

• Dividend =arned

• (apital *ain Distribution6 =arned

• (hange in price or ;A>#

D)R 0

•



ILLUTRATION: A mutual fund that had a net asset value of "0 at the beginning of month # mand capital gain distribution of 0.0$5 and 0.0 per share respectively duringand then ended the month with a net asset value of "0.0%. !alculate monthl

olution#

D)R 0

0 6.9BE:

0 E.9: per annum



Criteria of e$aluatin &erfor*a

'ar& Ratio# his ratio measures the return earned in e-cess of the ris$ free

reasury instruments( on a portfolio to the portfolio=s total ris$ as measured by

deviation in its returns over the measurement period.he harpe ratio is often usris$3ad!usted performance of various portfolios over the same time. he hi"her a h

better a portfolio=s returns have been relative to the amount of investment ris$ th

ta$en.

0



Tre/nor Ratio: his ratio is also $nown as the Reward to Volatility Ratio@ it is

fund=s avera"e e-cess return to the fund=s beta. reynor ratio evaluates the pe

a portfolio based on the systematic ris$ of a fund. reynor ratio is based on

that unsystematic or specific ris$ can be diversified and hence@ only incorp

systematic ris$ 'beta( to "au"e the portfolios performance. It measure

earned in e-cess of those that could have been earned on a ris$less inv

unit of mar$et ris$ assumed. he formula of the reynor ratio can be as fol

0

+oth harpe ratio and reynor ratio measure ris$ ad!usted returns. he diffe

how ris$ is defined in either case.In reynor ratio@ you loo$ at the beta of the

de"ree of GmomentumG that has been built into the portfolio by the fund mana"

derive his e-cess returns.

•

ensenBs Al&'a: his is the difference between a fund=s actual return and tho



ensen s Al&'a: his is the difference between a fund s actual return and tho

have been made on a benchmar$ portfolio with the same ris$3 i.e. beta. It m

ability of active mana"ement to increase returns above those that are purely

bearin" mar$et ris$.

Al&'a: Return of Portfolio < E%&e"te! Return

Alphas are found in many ratin" services but are not always developed the s

you can=t compare an alpha from one service to another. Dowever we have

that their relative position in the particular ratin" service is to be viable. hor

are not valid. Minimum time frames are one year3 three year is more preferabl



Influen"in fa"tor of sele"tin Past Perfor*an"e he Net Asset Value is the yardstic$ for evaluatin" a M

hi"her the NAV@ the better it is. )erformance is based on the "rowth of NAV du

period after ta$in" into consideration *ividend paid. <rowth 0 'NAV5 NAV6

Ti*in In a bullish mar$et@ investment in mutual fund falls si"nificantly in va

bearish mar$et@ it is the other way round where it re"isters "rowth. he turn

need to be observed.

i?e of Fun! )urchase throu"h lar"e si?ed fund may by itself push price

may push prices down@ as lar"e funds "et s&uee?ed both ways. o it is bette

medium si?ed funds.

Ae of Fun! %on"evity of the fund in business needs to be determined andin risin"@ fallin" and steady mar$ets have to be chec$ed. )edi"ree does not a

also success strate"ies in forei"n mar$ets.

Larest @ol!in It is important to note here the lar"est holdin"s in m t



Larest @ol!in It is important to note where the lar"est holdin"s in mutu

been invested.

Fun! Manaer 2ne should have an idea of the person handlin" the fund ma

person of repute "ives confidence to the investors.

E%&ense Ratio ,+I has laid down the upper ceilin" for ,-pense R,-pense Ratio will "ive a hi"her return which is better for an investor.

PE Ratio he ratio indicates the wei"hted avera"e ), Ratio of the

constitute the fund portfolio with wei"hts bein" "iven to the mar$et value o

helps to identify the ris$ levels in which the mutual fund operates.

Portfolio Turno$er A very low portfolio turnover indicates that he is neither

&uittin" the mar$et very fre&uently. A hi"h ratio@ on the other hand@ may su"

fre&uent moves have lead the fund mana"er to miss out on the ne-t b

investments. A simple avera"e of the portfolio turnover ratio of peer "rou

mutual fund trac$in" a"encies may serve as a benchmar$. he ratio is low

purchase plus annual sale to avera"e value of the portfolio.



COST AND FEES OF MUTUAL FUNDAll mutual funds have various e:penses that are paid by the fund@s sha

+hese e:penses can vary considerably from fund to fund#

+here are basically four types of e:penses or fees associated with buyi

owning mutual fund shares)

,3Sales charges or loads#E

'3,'b", fees#

-3Management fees#

.3+rading costs



SALES C#AR8ESMany mutual funds charge a fee whenever shares are purchased# +hegenerally called front"end loads# Funds that charge loads are called Funds that have no such charges are called no"load funds#

hen you purchase shares in a load fund! you pay a price in e:cess of value! called the o&ering price# +he di%erence between the o%ering pricasset value is the load# Shares in no"load funds are sold at net asset valu

Front"end loads can range as high as #0 percent! but 0 percent or so wotypical# Some funds! with front"end loads in the ' percent to - percendescribed as low"load funds# Front"end loads are e:pressed as a perce

o%ering price! not the net asset value#



E9AMPLE: SUPPOSE A LOAD FUND #AS AN OFFERIN8 PRICE OF ;<< AND A N=ALUE OF >?. T#E FRONT0END LOAD IS @ W#IC# AS A PERCENTA8E OF OFFERIN8 PRICE IS @;<< @ PERCENT. T#E WA& FRONT0END LOADS ARE CA

UNDERSTATES T#E LOAD SLI8#TL&. IN OUR E9AMPLE #ERE &OU ARE PA&IN8 SOMET#IN8 ONL& WORT# >? SO T#E LOAD IS REALL& @>? @.< PERCENT

Some funds have back"endE loads! which are charges levied on redemptions

are often called contingent deferred sales charges and abbreviated (DS(# +he declines through time#

;@B ; F""s



;@B0; F""s Mutual funds are allowed to use a portion of the fund1s assets to cover marketing costs# Funds that market directly to the public may use ,'b",advertising and direct mailing costs# Funds that rely on brokers and opersonnel often use ,'b", fees to provide compensation for their seramount of these fees could be #G0 percent to ,#H percent of the fund@s a

Fre7uently! ,'b", fees are used in con&unction with a (DS(# Such fundsno front"end load! but they e%ectively make it up through these othfunds may look like no"load funds! but they are really disguised loadfunds with no front"end or back"end loads and no or minimal ,'b", called pureE no"load funds to distinguish them from the not"so"pureE

have no loads but still charge hefty ,'b", fees



MANA8EMENT FEES

Management Fees are usually based rst on the si9e of the fund# Beyond this! tincentive provision that increases the fee if the fund outperforms some benchma

0HH#Management fees generally range from #'0 percent to ,#H percent of total fuyear#

5ngoing recurring e:penses 2Management =:pense 8atio3) +his is made up of the

• (ost of employing technically sound investment analysts

• Administrative (osts

• Advertisement (osts involving promotion and maintenance of Scheme funds

+he Management =:pense 8atio is measured as a percentage 2<3 of average vduring the relevant period#

=:pense 8atio)

di



+rading (ostsMutual funds have brokerage e:penses from trading &ust like individuamutual funds that do a lot of trading will have relatively high tradincosts can be diIcult to get a handle on because they are not r/owever! in the prospectus! funds are re7uired to report sometu'no!"'# A fund@s turnover is a measure of how much trading a calculated as the lesser of a fund@s total purchases or sales during a average daily assets#

E4a*(l": Suppose a fund had average daily assets of J0H millionbought JH million worth of stock and sold JGH million during the turnoverL +he lesser of purchases or sales is JGH million! and averageJ0H million# +urnover is thus JGH6J0H ,#. times#A fund with a turnover of ,#H has! in e%ect! sold o% its entire portfolionce during the year# Similarly! a turnover of #0H indicates that! loosefund replaced half of its holdings during the year# All else the same! aindicates more fre7uent trading and higher trading costs



MONE& MAR$ET MUTUAL FUNDS

Mutual funds are usually divided into two ma&or groups! short"term funds afunds# Short"term funds are collectively known as money mar'et mutual fun

funds essentially include everything that is not a money market fund

*on", *a')"t *utual /unds! or MMMFs! speciali9e in money market +hese are short"term debt obligations issued by governments and corpmoney market funds are open"end funds# Most money market funds inv7uality! low"risk instruments with maturities of less than KH days# As a resurelatively little risk# /owever! some buy riskier assets or have longer ma

others! so they do not all carry e7ually low risk# For e:ample! some buy onlyterm government securities and are therefore essentially risk"free# 5therssecurities issued by corporations which entail some risk#



Money market funds are either ta:able or ta:"e:empt# +a:able funds

common# As the name suggests! the di%erence in the two fund typtheir ta: treatment# As a general rule! interest earned on state government 2or municipalE3 securities is e:empt from federal inc;onta:able money market funds therefore buy only these types of tasecurities# Because of their favorable ta: treatment! ta:"e:empt moneinstruments have much lower interest rates! or yields#

For e:ample! in early ,KKK! ta:able money funds o%ered about .#interest! whereas ta:"e:empt funds o%ered only '# percent interest#better depends on your individual ta: bracket# $f you@re in a .H percenthen the ta:able fund is paying only .#N< O 2, " #.H3 '#GN< on anbasis! so you@re slightly better o% with the ta:"e:empt fund#

MONE& MAR$ET MUTUAL FUNDS-CONTINUED

#ISTOR& OF MUTUAL FUND IN



#ISTOR& OF MUTUAL FUND INBAN8LADES#

• $n ,KH! the $nvestment (orporation of Bangladesh 2$(B3 became t

launching mutual funds in the capital market in the country# $t was a for investors in our capital market#

• +hen the rst private organisation! A$MS! evolved its professional mechfor organising mutual funds in Bangladesh#

• Mutual funds grew slowly over the period of time and had only beesince beginning of its operation in the capital market#

• $n 'H,H! also the rst"ever open"end mutual fund was ?oated in the ca

the Prime Finance Asset Management (ompany and after that! variouscame to the market and mainly operated under the BS=( 2Mutual Fun

+rust Act! ,' and 8egistration Act! ,KH#



T&PES OF MUTUAL FUND INBAN8LADES#

Mutual funds may be of di%erent types from their investment ob&ectivunderlying portfolios of shares! risks and returns! fees! charges including fund liabilities#

+here are basically two types of mutual funds"

,# 5pen"ended and'# (lose"ended#

, 5 d t l



,# 5pen"end mutualfunds)

hen demand rises! the fund will continue to issue shares and there will be no the issue of the fund and the fund will be closed to new investors when assets wlarge#

5pen"end means at the end of every day! the fund continually issues neinvestors buying into the fund and must stand ready to buy back sharesredeeming their shares at the then current net asset value per share# +he pprice! or P5P! is the ;A> plus a sales charge applicable for open end mutual end mutual funds sell shares at the P5P and redeem shares at the ;A>! anorders only after the ;A> is determined#

•$(B Unit (erticate•$(B AM( Unit (erticate•$(B AM( Pension /older Unit (erticate and•Prime Finance Unit Fund

' (lose"end mutual



$t emerges under an initial public o%ering or @$P5@ it is publicly traded and amount of share and listed and traded at a stock e:change# Subse7uenshares trade with buyers and sellers of shares in the secondary marketdetermined price 2which is likely not e7ual to net asset value3# (losed"end fun

of which are traded by investors3 may trade at a higher or lower price than thknown as a premium or discount! respectively#

'# (lose"end mutualfunds

RE8ISTERED PARTIES REUIRED TO



RE8ISTERED PARTIES REUIRED TOLAUNC# A MUTUAL FUND IN

BAN8LADES#

+he Mutual Fund industry of Bangladesh is still in its nascent stage# At pres.H listed Mutual Funds in Bangladesh with the market capitali9ation being percent of the market capitali9ation of the capital market#

+o launch a Mutual Fund in Bangladesh! the following parties are re7uired)

•Sponsor• +rustee•(ustodian

•Asset Manager

+he Sponsor appoints +rustee! (ustodian and Asset Manager for the propo

Sponsor+here has to be a promoter of the company Sponsor is a bank nance or insu



+here has to be a promoter of the company# Sponsor is a bank! nance or insustatutory organisation which singly or &ointly can form a mutual fund with anotheinsurance company statutory organisation recognised registered trust funprovident fund# +here may be single or multiple sponsors for a fund#

+rustees

+hey hold the property of the mutual fund for the benet of the unit holders# +ve registered trustees in our capital market#,# $nvestment (orporation of Bangladesh 2$(B3'# Bangladesh *eneral $nsurance (ompany td# 2B*$(3!-# Sandhani ife $nsurance (o# td#.# Brac Bank td# and0# =astern Bank td

(ustodian$t bears the securities of various schemes of the fund in its places# +here are custodians in our capital market# +hese are as follows Q,# $nvestment (orporation of Bangladesh 2$(B3'# Standard (hartered Bank 2S(B3-# B8A( Bank td#.# (itibank ;#A

A t M



+hey are authorised to act as issue and portfolio manager of the mutual funds# Aare ,0 registered asset management companies in the market#

$(B Asset Management (ompany td#Bangladesh Development Bank td#Assets 4 $nvestment Management Services of Bangladesh td#8A(= Management Private (ompany td#8 *5BA Bangladesh Asset Management (ompany td#Prime Finance Assets Management (ompany td#>$PB Asset Management (ompany td#Alif Asset Management td#;ational Asset Management td#$nvest Asia (apital and Asset Management imitedAlliance (apital Asset Management td#

Asset Manger

TOP MUTUAL FUNDS BASED ON MAR$E



TOP MUTUAL FUNDS BASED ON MAR$ECAPITALIATION IN BAN8LADES#

Issue anage , of issue - of *ar+et share

AI*& 5 $'.$(

IC! A*C( $$ $'.'6

IC! 7 6.6!"!( $ $.$5

ACE 8 55.8(

( G(O!A( 9 ':.$8

/I'! ' (.79

According to prevailing participation of asset managers in our capital market! wthat 8A(= Asset Management (ompany possessed about .0 per cent highemutual funds compared to other issue managers based on their asset undernding also shows ,'#'0 per cent market share of manager to the issue goes to to $(B alone 0#0 per cent

5ut of 'H sectors at DS=! position of mutual funds 2MFs3 was the ,-th according recognises that out of total market capitalisation of DS=! mutual funds cascade oits total market capitalisation! which is very low

Market capitali9ation of Mutual funds



'HH 'HHK 'H,H 'H,, 'H,' 'H,- 'H,. 'H,0 'H,NH#HH<

,#HH<

'#HH<

-#HH<

.#HH<

0#HH<

G OF MFHS MAR$ET CAPITALIATION

During the crisis period of the capital market in 'H,H both market capitalisation and turnovin percentage points! compared to 'HHK# But it was gradually improving from 'H,,# $n 'HHKwas 0#HK million! in 'H,H it declined to ,#KH million and in 'H,, it slightly improved to -#.K hand! the percentage of MFs@ market capitalisation was .#-- in 'HHK! ,#., in 'H,H and ,#N,the year 'H,0 the percentage of MFs@ market capitalisation was H#K.<# So it is clear that

seen a gradual fall and it is an ominous sign for the market#

/owever! the market of MFs in 'H,' gives some positive signals! though the dividend decl'H,' compared to 'H,,! the price"earnings 2P6=3 ratio increased while the =PS 2earnings peron the D*=; 2DS= *eneral $nde:3 also saw a positive trend# +he latter three indicators give pthe market of MFs# $n such a situation focus needs to be more and more on how to make furthose areas# Actually! our MF and bond markets are not that developed despite immense pe:plore this opportunity to reduce the banking sector@s dominance in the capital market#

f-504(fixed income securities).pptx

Documents