Eight out of 37 mutual funds listed on the Dhaka Stock Exchange (DSE) have been shouldering the burden of the loss they incurred during the share market debacle of 2010.
“All the funds were issued in 2009 or 2010 when the market was at its peak and we bought the shares at a very high price,” said Md Golam Rabbani, chief executive officer (additional charge) of ICB Asset Management Company Ltd.
The current per share net asset value (NAV) of the eight mutual funds – all of them managed by ICB AMC, a subsidiary of state-run Investment Corporation of Bangladesh (ICB) – is lower than their primary NAV.
The funds, however, provided some dividends to their holders in the last few years thanks to their yearly performance.
Rabbani says ICB AMCL faces bindings when it comes to selling the high-priced shares and cannot get rid of them outright or even at a loss if they do not reach a certain level, leading the NAV of the mutual funds to remain low.
The NAV of ICB Third NRB, ICB Employees Provident Fund Mutual Fund, and ICB AMCL Second Mutual Fund are Tk 7.98, Tk 8.03, and Tk 9.36 respectively as of last Sunday, DSE data showed.
It was Tk 8.91 for IFIL Islamic Mutual Fund, Tk 9.91 for ICB Agrani One, Tk 8.47 for Phoenix Finance First Mutual Fund, Tk 9.54 for ICB Sonali Bank First Mutual Fund and Tk 8.84 for Prime Bank ICB Mutual Fund.
Mutual fund managers raise fund from a number of investors to create a pool of money that is then re-invested into stocks, bonds and other assets.
Investors are effectively shareholders in the fund in proportion to their investment and entitled to get dividend from the profit of the companies' investment.
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.
Rabbani says ICB has to extend support to the market when required and sometimes it affects the NAV.
“The good thing is that the NAV of the funds rose in line with the recent upward movement of the market. As a result, we have got some room to sell the shares and buy other shares as well.”