Five close-end mutual funds listed in Dhaka Stock Exchange (DSE) have published their unaudited quarterly financial statements for Q1 (July-September) of 2017.
The five funds are: AB Bank First Fund, EBL NRB Fund, PHP First Fund, SEML Lecture Equity Management Fund, and Popular Life First Fund.
Here is a summary of those five funds:
Fund Name EPU* (BDT) NAV at Cost** (BDT) NAV at Market^ (BDT)
AB Bank First Fund 0.11 10.96 12.44
EBL NRB Fund (0.08) 10.39 11.54
PHP First Fund (0.08) 10.31 11.74
SEML Lecture Equity Management Fund 0.40 10.78 10.42
Popular Life First Fund 0.16 10.71 11.79
*Earnings Per Unit for the quarter ended on September 30, 2017
**Net Asset Value at Cost on September 30, 2017
^NAV at Market on September 30, 2017
On the completion of the financial statements publication of these five funds, an investor might ask herself which factors drive the price and performance of a mutual fund. Here are some factors that you should consider before selecting a mutual fund.
Identify goals of the fund: Before acquiring any units of a close-ended mutual funds, an investor must identify the fund objectives and risk of the money being invested. Investors can easily look at the prospectus of the mutual fund to assess its long-term objectives. An investor should look at the quarterly portfolio statements, which are public after a regulation implemented by BSEC, to know whether the mutual fund has been complying with the goals written in prospectus. For instance, if a mutual fund claims to focus on dividend desire, and invests in non-dividend paying securities, the fund departed from its long-term objectives.
Assess risk tolerance of the fund: The risk tolerance of the mutual fund issue is an important factor to consider before investing in any mutual fund. This information can easily be found by analysing the portfolio statements along with the weekly Net Asset Value (NAV) of those funds. Quarterly portfolio statements are available in the fund website and the weekly NAV of each fund is available on the DSE website and in national dailies.
Look at the time horizon: An investor should find when the close-end fund started. Typical tenure for a Bangladeshi close-end mutual fund is ten years, and after the completion of its tenure, a close-end fund can either be liquidated or converted into open-end funds. The decision to liquidate or open depends on the unitholders of that fund. Open-end funds in Bangladesh do not have any pre-determined tenure.
Style of the fund: If the investor intends to use the money for a longer term and can handle a fair amount of risk, then the best bet may be a long term capital appreciation fund. These types of funds typically hold lots of different stocks in their portfolio which are considered to be volatile in nature. They also carry the potential for a large reward over time. Conversely, if the investor is in need of current income, he or she should acquire shares in an income fund, which usually invests in a few large-cap dividends paying stocks.
Fees and Charges: Each of the close-end funds in Bangladesh has to pay management fees, trustee fee, BSEC fees, custody fees, CDBL fees, and DSE & CSE fees. For the open-ended funds, an additional charge known as load is applicable. An investor must know the fees applicable to his invested fund. The higher the fees and charges the lower the return.
Size of the fund: Size of the fund is also an important factor to ensure the liquidity of an investment. If a fund is small, selling the investment will be difficult. Bangladeshi close-end funds industry offers a diverse range of size, going as low as BDT 100 million to as high as BDT 3,000.0 million.
Evaluate the fund managers: As for any investment, it is crucial to evaluate the past performance of the managers, and assess their ability to deliver future results.
Selecting a mutual fund might seem like a daunting task. However, looking at the quarterly portfolios and weekly NAV is winning most of the battle. With a little bit of due diligence, an investor’s chance of winning increases manifold.
The writer is currently working as an Analyst for a multinational investment management firm in Dhaka. He can be reached at [email protected]