B Mirror Report: The Bangladesh Securities and Exchange Commission (BSEC) has advised investors to carefully assess the net asset value (NAV) and other relevant information before investing in listed closed-end mutual funds.
The capital market regulator also warned investors against making investment decisions based on rumours, information circulated on social media, or inducements from individuals or groups.
The BSEC issued the advisory in a press release on Monday (October 5), noting that units of some mutual funds have recently been trading at significantly higher prices than their NAV per unit.
The commission said investors should exercise particular caution when there is a significant and unusual gap between a fund’s market price and its underlying NAV.
According to the BSEC, the value of a fund’s underlying assets is an important consideration when assessing the value of its units. If a mutual fund is liquidated, unit holders generally cannot expect to receive more than the fund’s NAV based on its underlying assets.
According to Dhaka Stock Exchange (DSE) data, units of five mutual funds are currently trading above their NAVs. Units of First Prime Mutual Fund are trading at more than three times their NAV, with the fund’s NAV at around Tk 9 per unit while its market price is above Tk 31.
Units of Prime Finance Mutual Fund and CAPM IBBL Mutual Fund are also trading at around 100% above their respective NAVs. Meanwhile, units of Reliance-1 Mutual Fund are trading more than 20% above NAV, while ICB Employees Second Mutual Fund units are trading more than 5% above NAV.
In contrast, units of the remaining mutual funds are trading below their NAVs, according to the DSE.
The BSEC advised investors to consider a fund’s actual asset value, financial condition, maturity period, investment strategy or portfolio, and other disclosed information before making investment decisions.
The commission urged investors to make informed decisions rather than relying on rumours or unverified information circulating on social media.
The BSEC explained that mutual funds are regulated investment vehicles that pool money from multiple investors and invest it in various financial instruments and other eligible assets.
The total value of a fund’s assets is determined based on the market value of its underlying investments. After deducting liabilities from total assets, the resulting amount represents the fund’s net asset value. The NAV per unit is calculated by dividing the total NAV by the number of units outstanding.
Under existing regulations, asset managers regularly disclose financial and other relevant information about mutual funds. The BSEC urged investors to review these disclosures carefully before investing.
