The investors’ poor response is forcing the fund managers to take time to float new mutual funds for subscription despite the fact that SEC has approved their trust deeds.
The situation has unfolded recently as some of the mutual funds have experienced poor subscriptions compared to other issues, which went public earlier.
“By observing the investors’ lukewarm response to the mutual funds (MFs), the fund managers are not in a hurry to go for subscription,” an SEC official said.
As per securities rules, a mutual fund will be registered after the SEC approves its trust deed. After the registration, the SEC will set the time-line for a mutual fund to go for subscription.
“After the registration, the fund managers are bound to go for subscription according to the time-line, set by the SEC. But they are not getting registration due to the investors’ poor response,” the SEC official said.
When asked, a fund manager asking not to be named, said, “it’s true that we are taking time for subscription because of the present situation.”
The SEC is now approving two mutual funds every month saying that it would help stabilise the market. But the inflow of new issues is not sufficient compared to that of mutual funds.
Professor Abu Ahmed, an economist and teacher at Dhaka University, said the country’s market is not capable of absorbing so many mutual funds.
“In our country, a wrong perception regarding the mutual funds has taken root from the very beginning. We have to remember that the units of mutual funds will be traded around their NAVs,” Professor Ahmed told the FE.
“So the fund managers should not expect high prices and they will have to achieve the investors’ confidence with their performance,” he added.
The mutual funds, which are at the moment awaiting subscription are Southeast Bank First Mutual Fund, National Life Mutual Fund, Rupali Life Insurance First Mutual Fund, LR Global Bangladesh Mutual Fund One, Agrani Bank First Mutual Fund, Mercantile Bank Limited First Mutual Fund, NBL First Mutual Fund, NCC Bank Limited NRB Mutual Fund and Sonali Bank First Mutual Fund.
The initial public offering (IPO) lottery draw of IFIL Islamic Mutual Fund will be held on October 26 and its IPO has been over-subscribed only 3.31 times, whereas the funds — EBL First Mutual Fund, Phoenix Finance First Mutual Fund — were subscribed 18 times.
EBL First Mutual Fund had been subscribed by 17.19 times, ICB AMCL 2nd Mutual Fund by 8.29 times, ICB Employees Provident Mutual Fund One : Scheme One by 7.91 times, Trust Bank 1st Mutual Fund by 10.28 times, DBH 1st Mutual Fund 10.77 times, Prime Bank 1st ICB AMCL Mutual Fund by 10.77 times, IFIC Bank 1st Mutual Fund 17.59 times and Phoenix Finance 1st Mutual Fund 19.23 times.
On the other hand, the mutual funds, which recently went public, were also traded at prices well below the investors’ expectation.
Source: The financial express, 26 October, 2010