Course

Economics Discipline, Khulna University,

MSS Program

Course No. : Econ 5209

Course title : International Business
Credit hour :3
Course status : Optional
Course teacher :Khan Mehedi Hasan

14-1
19-1
 SECURITIES AND EXCHANGE
COMMISSION

Public Issue of Securities:

Mutual Fund

19-2
 What is Mutual Fund ?

 A Mutual Fund is a professionally managed

collective investment scheme that pools money
from many investors and invests typically in
securities (stocks, bonds, short term money
market instruments, other mutual funds and
other securities) on behalf of the investors/unit
holders and distributes the profits.

19-3
 What is Mutual Fund ?

 In other words, a mutual fund allows an investor

to indirectly take a position in a basket of assets.

19-4
 How do mutual funds diversify their
risks?

 According to basic financial theory an investor can

reduce his risk by holding a portfolio of assets
instead of only one asset. This is because by holding
all your money in just one asset, the entire fortunes
of your portfolio depends on this one asset. By
creating a portfolio of a variety of assets, this risk is
substantially reduced.

19-5
 Can mutual funds assumed to be risk-free
investments?
 No. Mutual fund investments are not totally risk
free. In fact, investing in mutual funds bears the
same risk as investing in the equities, the only
difference is that due to professional management
of funds the controllable risks are substantially
reduced.

19-6
 What are the types of risks involved in investing
in mutual funds?

A very important risk involved in mutual fund

investments is the market risk. When the market is in
doldrums, most of the equity funds will also experience
a downturn. However, the company specific risks are
largely eliminated due to professional fund management.

19-7
 Advantages of Investing Mutual Funds:

Professional Management :
The basic advantage of funds is that, they are professionally
managed, by well qualified professionals. Investors purchase
funds because they do not have the time or the expertise to
manage their own portfolio. A mutual fund is considered to be
relatively less expensive way to make and monitor their
investments.

Diversification
Purchasing units in a mutual fund instead of buying individual
stocks or bonds, the investors risk is spread out and minimized
up to certain extent. The idea behind diversification is to invest
in a large number of assets so that a loss in any particular
investment is minimized by gains in others.
19-8
 Advantages of Investing Mutual Funds:

Economies of Scale: Mutual fund buy and sell large

amounts of securities at a time, thus help to
reducing transaction costs, and help to bring down
the average cost of the unit for their investors.

Liquidity : Just like an individual stock, mutual fund

also allows investors to liquidate their holdings as
and when they want.

Simplicity: Investments in mutual fund is

considered to be easy, compare to other available
instruments in the market, and the minimum
investment is small.

19-9
 What are the parameters on which a
Mutual Fund scheme are evaluated?

Performance indicators are:

total returns given by the fund on different
schemes,
-the returns on competing funds,
-the objective of the fund and
-the promoter’s image

These are some of the key factors to be

considered while taking an investment decision
regarding mutual funds.
19-10
 Types of Mutual Fund

BY STRUCTURE

Open- Ended Mutual Fund :

An open-end fund is one that is available for
subscription all through the year. These do not
have a fixed maturity. Investors can conveniently
buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end
schemes is liquidity.

19-11
 Types of Mutual Fund
BY STRUCTURE
Closed- Ended Mutual Fund :
A closed-end fund has a stipulated maturity
period which generally ranging from 5 to 15
years.

The fund is open for subscription only during a

specified period. In this case ,the total size of the
fund is limited by the size of the initial offer.

19-12
 Formation of Mutual Fund

To launch a Mutual Fund following parties are

required:
i) Sponsor
ii) Trustee
iii) Custodian
iv) Asset Manager
Sponsor will appoint Trustee, Custodian and
Asset Manager for the proposed Fund.

19-13
 Formation of Mutual Fund

Who Can be Sponsor of a Mutual Fund ?

Sponsor is a Bank, Finance or Insurance Company or

Statutory Organization who singly or jointly can form a
mutual fund with another Bank, Finance or Insurance
Company, Statutory Organization Recognized Registered

-There may be single or multiple sponsor for a Fund.

19-14
 Who may be a Trustee of a Mutual Fund?

-
Trustee of a Mutual Fund must be registered by the
Commission
-Currently there are 5(five) registered Trustees in the
market. They are:
1) Investment Corporation of Bangladesh (ICB) and
2) Bangladesh General Insurance Company Ltd. (BGIC)
3) Sandhani Life Insurance Co. Ltd.
4) Brac Bank Ltd.
5) Eastern Bank Ltd.

19-15
 Who may be a custodian of a Mutual Fund?

Who may be a Custodian of a Mutual Fund?

- Custodian of a Mutual Fund must be registered by
Commission
-Currently there are 4(four) registered Custodian in the
market. They are:
1) Investment Corporation of Bangladesh (ICB) and
2) Standard Chartered Bank (SCB)
3) Brac Bank Ltd.
4) Citibank N.A

19-16
 Who may be the Asset Management Company of
a Mutual Fund?
-
- Currently there are 11(eleven) registered Asset
Management Companies in the market. They are:
1) ICB Asset Management Company Ltd.
2) Bangladesh Development Bank
3) Assets & Investment Management Services of
Bangladesh Ltd.
4) RACE Management Private Company Ltd.
5) LR GLOBAL Bangladesh Asset Management
Company Ltd.
6) Prime Finance Assets Management Company Ltd.
7) VIPB Asset Management Company Ltd.
8) Alif Asset Management Ltd.
9) National Asset Management Ltd.
10) InvestAsia Capital and Asset Management Limited.
19-17 11) Alliance Capital Asset Management Ltd.
 Valuation of Mutual Fund
-

-NAV of a unit is the intrinsic value of a unit of a

Mutual Fund.

As per the rule:

NAV (Fund)= Value of the Total Asset of the Fund as
on date - Total Liabilities of the Fund as on date

NAV (Per Unit)= Total NAV/ Number of Outstanding

Units

19-18
 Dividend of Mutual Fund

- The amount of total dividend to be declared

for the year shall not be less than 70
(seventy) percent of the total net profit
earned in the respective year.

- Dividend should be distributed among the unit

holders within 45(forty five) days of declaration.

19-19
 Rights of the Unit Holder

-Dividend
-Tax Benefit
-Transferebility
-Right to Vote
-Reports and Accounts
-Beneficial Interest

19-20
 Many thanks for your patience hearing.

Questions / Comments

21
19-21 21