The trustee of two close-ended mutual funds proposed converting them into open-ended funds upon maturity in December this year.
The funds — SEML Lecture Equity Management Fund and Vanguard AML BD Finance Mutual Fund One — overseen by Strategic Equity Management and Vanguard Asset Management will complete 10 years on December 23.
Asset managers say unitholders will be benefited in both ways – conversion or liquidation.
However, conversion is subject to unitholders’ approval and regulatory consent, according to the stock exchange filing on Sunday.
Bangladesh General Insurance, trustee of both funds, said asset managers had requested necessary measures to facilitate the conversion.
As per the latest amended mutual funds rules, close-ended funds must be redeemed on reaching maturity; no tenure extension will be allowed, a corrective move to change course from past mistakes.
However, such funds may get converted into open-ended funds if three-fourth unitholders, based on the percentage of ownership, give approval.
Asset managers will bear all expenses associated with the conversion process, as per the Bangladesh Securities and Exchange Commission directive in this regard.
Mir Ariful Islam, managing director of Sandhani Asset Management, explained that redemption would allow unitholders to recover investments at the current net asset value (NAV) of the funds, a relief for them especially when units of listed mutual funds are trading at heavy discounts in the secondary market.
On the other hand, if these funds are converted into open-ended securities, unitholders will have options to keep investments or exit from the portfolios, he said.
Unitholders in that case may surrender open-ended fund units and the asset manager concerned will be obligated to liquidate the underlying assets of the surrendered units and pay cash back to investors at the current net asset value which is usually higher than the market price, he added.
Return on investments from Vanguard AML BD Finance MF One
Investors, who invested in 2016 and have held on to their holdings until redemption, will, however, have insignificant return on investments.
The fund distributed 2.0 per cent to 15 per cent cash dividends between 2016 and 2023. The net asset value (NAV) per unit is Tk 9.02 at present, which is 9.8 per cent lower than the face value.
Considering the dividend income and NAV, unitholder’s average annual return comes around 5.28 per cent until 2023, much lower than inflation during the period.
Return on investment from SEML Lecture Equity Fund
The fund distributed 2.5 per cent to 15 per cent cash dividends between 2016 and 2023. The net asset value (NAV) per unit is Tk 9.95 at present, slightly lower than the face value.
If the dividend income and NAV are taken into account, unitholder’s average annual return would be 5.15 per cent in the nine years until 2023.
If converted, these MFs will be the third and fourth close-ended funds to be converted into open-ended funds.
The trustee is yet to fix the unit holders’ meeting date. However, the trade suspension date was set on October 22 regarding unit holders’ meeting.
A close-ended fund is a collective investment scheme that pools money from a number of investors, usually for a decade, in order to be reinvested into stocks, bonds and other assets. Depending on the profits earned, investors are paid back in dividends.
Open-ended mutual funds are not listed in the stock market, but one can buy them from a fund manager’s office on the basis of its net asset value. Investors can sell off fund units at any time at prices based on its current net asset value.
https://thefinancialexpress.com.bd/stock/dse-turnover-hits-highest-level-in-over-eight-months
