Sandhani readies tax-efficient mutual fund

Sandhani Asset Management is all set to launch the country's first no-dividend mutual fund, which is the most tax-efficient investment tool of its kind.

Mutual funds pool money from investors to channel it into securities such as stocks, bonds and other assets. Investors are then paid their share as dividends depending on the profits earned.

When fund managers provide their unit holders with a certain percentage of dividend, 10 to 15 per cent tax is deducted from the investors' shares.

But since there is no tax on capital gain, Sandhani Asset Management decided to introduce a fixed-income mutual fund that bears no dividend.

As such, investors can benefit from the new feature by selling units back to the fund manager when they reach a higher value, according to Mir Ariful Islam, managing director and chief executive officer of Sandhani Life Insurance.

The unit prices will be determined on the basis of its current net asset value and so, there is no chance for investors to get a lower price, he said.

Other than being more tax effective, investments in no-dividend mutual funds are safe as it is a fixed-income fund and the proceeds will be mostly invested in fixed-income instruments.

"So, the fund will be a perfect fit for investors who want to protect their investment against inflation and secure a stable return," Islam added.

Banks that use credit ratings offer very minimum interest rates and, in most cases when it is lower than the inflation rate, the fund could be more profitable as its investment exposure will be in government securities and investment-grade bonds.

"This offers much better returns than fixed deposit receipts or deposit pension schemes."

Bangladesh Securities and Exchange Commission approved the Sandhani Asset Management SLIC Fixed Income Fund last month and its subscription is going to start from Sunday.

The size of the fund could reach up to Tk 50 crore, of which Tk 10 crore was provided by its sponsor, Sandhani Life Insurance. The rest can be raised from general investors with the price of each unit set at Tk 10.

Sandhani Asset Management, Bangladesh General Insurance and Brac Bank are the fund's asset manager, trustee and custodian respectively.