Capitec's close-ended growth fund undersubscribed

Some 44 per cent units of Capitec Grameen Bank Growth Fund have remained unsold in the public portion, reflecting a further erosion of investor confidence in the mutual fund sector.

The overall sector's weak performance affected the subscription of the new close-ended fund, said the asset manager.

The subscription of the MF took place between September 24 and October 1 this year, intended to raise Tk 1 billion.

But the growth fund received Tk 0.56 billion, falling short of Tk 0.44 billion to meet the target, according to the Dhaka Stock Exchange.

As the fund was undersubscribed, every applicant received 100 per cent units against their application. The size of the fund stood at nearly Tk 1.56 billion due to lower subscription by general investors.

However, there will be no problem in the listing on the stock exchanges since, as per mutual fund rules, any fund qualifies for listing if it achieves 50 per cent of the target.

On August 14, the stock market regulator --- Bangladesh Securities and Exchange Commission --- approved the draft prospectus of the Tk 2 billion growth fund.

Of the total size, the sponsor of the fund -Grameen Bank provided Tk 1 billion while the remaining Tk 1 billion was supposed to be collected from all kinds of investors through an IPO. The face value of each unit is Tk 10.

The Dhaka Stock Exchange on Monday allocated the units of the fund to the eligible and general investors through the electronic subscription system (ESS).

Chairman of Capitec Asset Management Hasan Rahman said the prevailing economic and political concerns stemming from the Russia-Ukraine war caused a negative impact on the overall stock market as well as subscription of the fund.

"Presently, many investors follow a wait-and-see approach before investing. Due to this, many banks are also not able to complete their bond subscription on time," Mr Rahman added.

"Despite such a situation, investors have kept faith in us. We will try to give maximum returns to investors."

Capitec has been managing three open-ended mutual funds. Two of those secured double-digit returns in FY22.

Capitec also won the prestigious 'Independence Golden Jubilee Award-2022 from the BSEC, securing the first position in the best asset manager category for its outstanding performance in the stock market.

Currently, 36 closed-ended mutual funds are listed on the stock exchanges. However, 34 of those funds trade below the face value of Tk 10 each unit.

That keeps investors away from investing in mutual funds.

A mutual fund is a professionally-managed investment scheme usually run by an asset management company that pools money from investors and invests in stocks, bonds and other assets. Depending on the profits earned, investors are then paid back in the form of dividends.

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