Mutual funds failing to generate confidence

Mutual funds are suffering for failing to generate confidence due to a lack of professionalism of fund managers, underlying problems of the funds and a lack of strong leadership of the stock market regulator in the past, according to LR Global Bangladesh.

There is a huge lack of professionalism in the industry which ultimately impacted the mutual fund sector, said Reaz Islam, CEO of LR Global Bangladesh, yesterday.

The mutual funds have some underlying problems which impacted the industry further, he said.

For instance, some companies' performance, and their investment efficiency disheartened investors.

As a result, most of the funds are traded at very high discounts but investors do not buy these, Islam said.

The BSEC leadership was also not up to the mark in the last few years. However, the present commission is doing good, he said.

His comments came yesterday in a press conference that was organised by LR Global Bangladesh at the auditorium of the American Chamber of Commerce in Bangladesh (AmCham).

The LR Global CEO lauded the present commission for its steps for easing IPO processes, developing the bond market, forming a capital market stabilisation fund, reforming junk stocks, mandating a dividend distribution policy and others.

Syed Ershad Ahmed, president of the AmCham, addressed the event through videoconferencing. Monowar Hossain, head of legal and compliances of LR Global, and Ronald Micky, chief financial officer of LR Global, were present.

About the country's stock market, Islam said the market does not match the scenario of economic development.

"Our market remains sluggish despite a big fall in 2010 which is not common in the world market. But it is showing some stability in the last one year," he said.

Average yearly return of the market was over 34 per cent in the last one year which was 1.32 per cent in the negative on an average a year ago. Average daily turnover also rose 30 per cent to stand at Tk 808 core from Tk 631 crore in the past, the LR Global CEO said.

"Volatility of the market has also reduced," he said.

These indicate material changes and are indicative of increased confidence in the market, he said.

LR Global funds returned over 44 per cent cash dividend on par over the last 10 years despite the market being bearish.

Responding to a question, he acknowledged that the previous commission's tenure extension decision for closed-end mutual funds was not a good one.

LR Global manages six closed-end funds amounting to Tk 1,054 crore as of last Thursday.