MTB Unit Fund an exception

Babul Barman

The mutual fund sector is passing hard times as most of the Funds are now being traded below their face value.

A prolonged downtrend in share prices since the market debacle in 2010-2011 is mainly responsible for the sorry state, fund managers said.

Many mutual fund units will fail to announce dividends for the unit holders, as the net asset value (NAV) of the units dropped below their face values.

A total of 41 closed-end mutual funds and 6 open-end mutual funds are operating in the stock markets. Seven asset management companies manage 41 closed-end mutual funds while four asset management companies manage 6 open-end mutual funds.

The total issued capital of mutual funds in the stock market is about Tk 37.44 billion which is 4.0 per cent of the total issued capital of shares.

As on 26 May, 2013, 28 mutual funds, out of 41 (closed-end), were traded below their Net Asset Value (NAV) while 24 mutual funds dropped below their face value.

The NAV of a mutual fund shows its ability to give dividends to the unit holders. When the NAV of a fund rises beyond its face value, it is more able to give dividends.

After the market debacle in 2010, the last open-end mutual fund is 'MTB Unit Fund' sponsored by Mutual Trust Bank and managed by Alliance Capital Asset Management Limited.

The MTB Unit Fund is performing well since its inception and fulfills its regulatory condition despite the tough time for the overall mutual fund sector.

Analyzing the NAV of the closed end mutual funds, the 'MTB Unit Fund' secured first position on January 6, 2013 based on NAV and secured fourth, fifth and seventh position till May 26, 2013.

The General Index of the Dhaka Stock Exchange (DGEN) went down by 24.44 per cent and market capitalization dropped 10.96 per cent till December 26, 2011 to May 26, 2013.

Under such a situation, the MTB Unit Fund is disclosing advanced NAV. The Fund disclosed about 27.24 per cent advanced NAV (based on DGEN).

According to performance of the fund, only Investment Corporation of Bangladesh (ICB)-operated mutual funds are the rival of MTB Unit Fund in the last five months.

Wali-ul-Maroof Matin, Chairman and Managing Director of Alliance Capital Asset Management Ltd said that they have an eight-member research team to observe and manage the MTB Unit Fund.

"The fund came into the market as a balanced one and maintained a sound characteristic," said Mr Matin.

It is obvious that the NAV of mutual funds will drop if share prices fall, asset managers said.

"The present trend is not good," said Yawer Sayeed, managing director of AIMS of Bangladesh, the country's first private asset management company.

The future of mutual funds depends on how much dividends the asset managers will declare next month, he said.

"If a major portion of the funds cannot declare dividends, the retail investors would backtrack on investing in the sector, leaving a big negative impact on the sector," he said.

The role of the regulator is a major reason behind the current setback in the mutual fund sector, said a fund manager. "When the market was bullish, the regulator allowed excess mutual funds to operate in the market," he said.
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