The ninth open-ended mutual fund of the year received its nod from the Bangladesh Securities and Exchange Commission (BSEC) on Wednesday, in a bid to make mutual funds more dynamic in the country.
The stock market regulator approved the draft prospectus of CandleStone Rupali Bank Growth Fund, an open-end mutual fund.
CandleStone Investments Partner Ltd (CSIP), is the sponsor and fund manager of the mutual fund.
CSIP is an asset management and corporate advisory firm based in Dhaka.
The firm also offers financial and transactional advisory services in areas of mergers and acquisitions, capital raising, financial due diligence, and enterprise valuations.
An open-end mutual fund is a collective investment scheme that can issue and redeem shares at any time.
An investor can purchase shares in the fund directly from the fund itself, rather than from the existing shareholders.
Open-end shares do not trade on exchanges and are priced at their portfolio's net asset value (NAV) at the end of each day.
The BSEC gave the approval at a commission meeting held in the capital on the day, presided by its chairman Prof Shibli Rubayat-Ul-Islam.
As per the BSEC approval, initial size of the fund will be Tk 100 crore.
The sponsors will contribute Tk 15 crore while the remaining Tk 85 crore will be collected from investors through sales of units.
The offer price of the units of CandleStone Rupali Bank Growth Fund is Tk 10 each.
Investment Corporation of Bangladesh (ICB) and Brac Bank are working as trustee and custodian of the fund respectively.
Analysts and stock market insiders have attributed a lack of investable funds in the market and confidence crisis as major reasons behind the low popularity of mutual funds in the country.
Reality of mutual funds in Bangladesh
Speaking to Dhaka Tribune, stock market analysts said investors were unwilling to invest in mutual funds due to their lower returns.
They also said that mutual funds play an important role in keeping the market stable. But the roles and performances of fund managers have recently come under question.
A top official of an asset management company said that typically prices of mutual fund units remained very close to their net asset values (NAVs) in a global context. However, they were unusually lower in Bangladesh, making investors dissatisfied with the returns of investment.
President of the Association of Asset Management Companies and Mutual Funds (AAMCMF) Hasan Imam said the sector ended up disbursing low dividends, as the stock market has remained bearish for long.
Some people believe that mutual funds are risk- free instruments, but in reality some risks remain there since the funds are invested into the stock market, he added.