The fund’s price more than doubled in three months to close at Tk 21 on Tuesday, which is above its net asset value
Islami Bank on Tuesday announced its intent to sell a portion of its holdings in a mutual fund in which it is the main sponsor.
The country’s largest private bank will sell 5 lakh units of its total holding of 5 crore units in the closed-end CAPM IBBL Islamic Mutual Fund, it said in a posting on the website of the Dhaka Stock Exchange.
A closed-end mutual fund is a portfolio of pooled assets that raises a fixed amount of capital through an initial public offering (IPO) and then lists shares for trade on a stock exchange.
The timing of Islami Bank’s announcement though appears rather suspect.
The fund’s price more than doubled in three months to close at Tk 21 on Tuesday, which is above its net asset value. The NAV represents the net value of an entity and is calculated as the total value of the entity’s assets minus the total value of its liabilities.
On December 6, the CAPM IBBL Islamic Mutual Fund’s NAV stood at Tk 10.33 on December 6.
In recent months, there has been an unusual price hike of mutual funds, prompting the Bangladesh Securities and Exchange Commission (BSEC) on November 17 to form an inquiry committee.
The inquiry committee, which will be led by BSEC Deputy Director Md Wahidul Islam, was asked to submit a report within 30 working days.
And this is one of the five funds the committee will primarily look into, said a BSEC official requesting anonymity due to the sensitivity of the matter.
The other mutual funds are SEML IBBL Shariah Fund, Vanguard AML Rupali Bank Balance Fund, NCCBL Mutual Fund-1 and Prime Finance First Mutual Fund.
“If the unit price is close to the NAV, that's normal. But if it is higher, it is unusual,” Shahidul Islam, chief executive officer (CEO) of VIPB Asset Management, told Dhaka Tribune.
Most of the amount of the mutual funds are invested in listed securities.
Usually, the NAVs of mutual funds will rise based on market price following the rise in the capital market.
But the capital market did not see the astronomical increase that the 37 mutual funds did.
“Mutual funds had never seen such a rally that we saw in recent weeks,” said a stockbroker requesting anonymity.
The sales declaration by the sponsor comes just after the mutual fund saw a sharp hike in recent days, he added.
The mutual fund, which was listed on the Dhaka Stock Exchange in 2018, disbursed no dividend for the year that ended on June 30, 2020.
The Investment Corporation of Bangladesh is the fund’s trustee and custodian and Capital & Asset Portfolio Management Company (CAPM) is its asset manager.