Paper on

“Mutual funds in Bangladesh”

Submitted by

“Group Name: Team Wallstreet”

NAME ID

“Ragib Mahmud Salman” “ID#2022344630”

“Abdur Rahman Chowdhury Abdullah” “ID#2111960630”

“Sadia Yesmin” “ID#2122067630”

“Mubashir Mahe” “ID#2121742630”

Date of Submission: 22/11/2023

Table of Contents
Introduction ........................................................................................................................................... 1
Overview ............................................................................................................................................. 1
Objectives ........................................................................................................................................... 2
Limitations .......................................................................................................................................... 2
Methodology: ......................................................................................................................................... 3
Data collection tecniques: ................................................................................................................... 3
Sources of data collections: ................................................................................................................ 4
Findings and Analysis ........................................................................................................................... 4
Findings .............................................................................................................................................. 4
Analysis of the Findings ..................................................................................................................... 6
Recommendations ................................................................................................................................. 8
Conclusion ............................................................................................................................................. 8
References ............................................................................................................................................... b

a
Introduction

Overview

The landscape of the financial market in Bangladesh has witnessed a transformative journey,

with mutual funds standing out as a pivotal player. In the middle of the 20th century (In 1980

ICB launched the first ever mutual by which the journey of mutual funds began) the idea of

mutual funds which combined the assets of several individuals to invest in a diverse portfolio

to became popular throughout the world. The development of mutual funds in Bangladesh was

a response to the increasing demand for inclusive investment possibilities and for ways to direct

investments toward profitable ventures. (Chowdhury, 2018)

In other word a mutual fund is a type of pooled investment or collective investment scheme

(CIS). Investors deposit their money on this platform and a qualified fund manager uses the

money raised to buy a variety of assets, including equities, bonds, short-term money market

instruments, and other financial products. Small savings from the retail sector are gathered via

mutual funds. An investor's share of the investment portfolio is represented when they buy a

mutual fund unit. Through mutual funds individual investors have the option to have a

professional fund manager manage their funds, which would otherwise be costly and in most

cases out of their reach. Moreover, mutual funds enable the holding of a broadly diversified

portfolio.

The mutual funds in Bangladesh are established and governed by the Registration Act of 1908.

The trust (Act of 1882) and the Bangladesh Securities and Exchange and Commission Mutual

Fund Rules of 2001. Even though mutual funds have been around in Bangladesh for more than

38 years the industry is still in its infancy and is relatively tiny in comparison to the capital

market. There have only been closed-end funds in the nation since the sectors founding in 1980.

b
The first mutual fund in Bangladeshi history was introduced by Investment Corporation of

Bangladesh (ICB) and it was dubbed the first ICB mutual fund. This industry has grown

extremely slowly ever since. The nation saw the introduction of its first open-end mutual

fund in 2010. (ICMAB, 2020)

Objectives

Initiating the study on mutual funds in Bangladesh involves the primary task of clearly

delineating its objectives, which include things like regulatory insights, performance

evaluation, and market trend analysis. It is crucial to ensure that information is current and

reliable, and this is accomplished by carefully relying on reliable sources, such as reliable

books and articles, financial news portals, and the official Bangladesh Bank website. The study

also includes a thorough analysis of the literature that has already been written, a process that

is essential to classifying mutual funds according to important variables including asset classes

and risk profiles. The study creates models suited to these particular features in order to

examine the regulatory environment in greater detail and evaluate fund performance. (Bank,

n.d.)

Limitations

All of these realizations are condensed into a meticulously written assessment that is concise

but comprehensive, and it is rigorously cited in academic journals. This narrative functions as

a thorough investigation, tying together the many components of mutual funds in Bangladesh,

including regulatory frameworks, performance reviews, and market trends. It provides a

complex and comprehensive view of the ever-changing sector, going beyond cursory

2
assessments. This broad perspective, which acknowledges the interaction of numerous

elements influencing Bangladesh's mutual fund market, is based on an extensive analysis. The

paper maintains academic rigor, transparency, and accountability since it is supported by

careful citation of reliable sources.

The final phase in quality assurance involves subjecting the selected approach to a thorough

examination by professionals. By verifying accuracy and resilience, this assessment guarantees

that, the paper endeavors to provide a comprehensive perspective that transcends one-

dimensional analysis by encompassing a multitude of viewpoints, ranging from market

dynamics to regulatory subtleties. The chosen methodology undergoes a rigorous scrutiny

process, where it is subjected to the discerning examination of experts in the field. This critical

evaluation is designed not only to validate the precision and robustness of the methods

employed but also to ensure the correctness of the interpretations and conclusions drawn from

the study. This thorough and iterative review process, marked by the incorporation of expert

feedback, is a testament to the commitment to excellence and scholarly integrity, providing an

additional layer of assurance before the research is disseminated through publication or

presentation.

Methodology:

Data collection tecniques:

The first step in developing a thorough technique for understanding mutual funds in

Bangladesh is establishing the goals and scope of the study. This entails determining the goal,

whether it is regulatory framework knowledge, performance evaluation, or market trend

analysis. It becomes essential to obtain knowledge only from websites, books, and articles

found online. Trusted websites, including the official Bangladesh Bank website, financial news

3
portals, and finance-focused platforms, provide up-to-date information about mutual funds.

Reading e-books and articles from well-known writers or scholarly sources provides insight

into the development of mutual funds in Bangladesh as well as its historical context. For official

reports, rules, and statistical data, it is also essential to explore the websites of financial

institutions, stock exchanges, and regulatory agencies such as the Bangladesh Securities and

Exchange Commission (BSEC).

Sources of data collections:

This study includes a comprehensive evaluation of the literature, in which data from several

sources is examined to identify trends, differences, and key findings. As the approach is

developed, mutual funds are categorized using available data, taking into account asset classes,

investment objectives, and risk profiles. In addition, models are developed for assessing fund

performance, analyzing regulatory settings, and comprehending common investing approaches

in Bangladesh's market. Incorporating these results into a coherent text with appropriate

referencing and attributions provides an in-depth understanding of mutual funds in Bangladesh.

Completing this careful procedure ensures accuracy and relevance in studying the complex

mutual fund ecosystem of Bangladesh. It includes validating the technique through expert

feedback, making the required modifications, and finishing the paper for publishing or

presentation.

Findings and Analysis

Findings

On the BSEC website, 34 closed and 94 open mutual funds in Bangladesh as of November of

2023. The annual report of the ICB AMCL Close End Mutual funds for FY2018-2019 indicates

4
that The total net assets of the country's 49 open-end mutual funds as of 30 June 2019 were

BDT 7944.65 crore. The total size of Bangladesh's mutual fund sector as of 30 June 2019 was

BDT 11487.85 crore, or 0.62% of FY 2018-19 GDP.

The primary data acquired from a survey conducted on the mutual fund investors or potential

investors of mutual funds in Dhaka city revealed several signs, such as portfolio diversification

being the key theme of investing in this market, which is not being addressed adequately by

asset management firms; investors are hesitant to reinvest units and favour cash dividends over

stock dividends; a lack of information hampers potential investors; and reinvestment is

difficult. Unit, transparency, current dividend policy, tenure uncertainty, and so forth are all

issues that must be addressed (Chowdhury et al., 2020).

Assets: The size of assets under management (AUM) in Bangladesh is insignificant, compared

to neighbouring India and Pakistan, although the number of asset management companies

(AMCs) in Bangladesh is much higher than in those two countries. This significantly higher

number of AMCs only manages around 1.60 Billion Dollars which is just a fraction of the the

assets managed by the Indian AMCs (Financial Express).

Historical Performance: Upon evaluating the data from 32 close-end mutual funds in

Bangladesh. EBL1STMF had an annualized mean return of 28.59% which was the highest in

FY2017-18. (Chowdhury et al., 2020) A recognizable pattern develops in the arena of financial

complexities, illustrating the success of 16 funds over the market, as seen through the

perceptive lens of Sharpe Measures. The top triumvirate, with the most commendable Sharpe

measures, is none other than the legendary trifecta: ICB2NDNRB, EBL1STMF, and

RELIANCE1. Looking deeper into the complicated fabric of financial performance, a

significant 20 funds outperform the market when seen via the Treynor Measures perspective.

5
Here, the illustrious trio of Treynor champions parades onto the stage as SEBL1STMF,

AIBL1STIMF, and NLI1STMF.

Current Reformations of Regulations: Mutual fund management fees are to be fixed on

performance and profitability according to the new provisions set by the BSEC. BSEC

Chairman Prof Shibli Rubayat Ul Islam stated that the new provisions will be announced

through a gazette notification (Daily Star).

Analysis of the Findings

As of the illustrious month of November in the year 2023, the Bangladesh Securities and

Exchange Commission (BSEC) stands witness to the orchestration of a harmonious

ensemble—comprising no less than 34 closed-end and a sizable 94 open-end mutual funds—

in Bangladesh's ever-evolving financial landscape. This complicated composition, an opus in

the symphony of investment mechanisms, illustrates the kaleidoscope diversity of financial

instruments, each playing a nuanced function in the nation's investment arena's great

performance.

According to the annual report of ICB AMCL Close End Mutual Funds for FY2018-2019, the

total net assets of the country's 49 open-end mutual funds as of June 30, 2019, were BDT

7944.65 crore. During that period, the total size of Bangladesh's mutual fund business reached

BDT 11487.85 crore, accounting for 0.62% of the country's GDP in fiscal year 2018-19. The

yearly study underlines the resonance of portfolio diversity among mutual fund investors in the

landscape of investor preferences. This demonstrates a clear preference for risk management

as investors traverse the financial landscape.

When it comes to the potential of reinvesting units, investors display a certain reluctance, a

careful waltz, in the delicate dance of investment dynamics. This nuanced conduct suggests a

preference for the appeal of actual cash dividends over stock dividends. The investing

6
environment, a maze of financial choreography, suggests that potential investors are caught in

the riddle of insufficient information, asking for a paradigm change toward heightened

communication and unapologetic openness.

Nonetheless, the operational symphony within asset management's halls echoes the discord of

difficulties. Investors face reinvestment unit complexities, the desire for transparency, the

opaque terrain of prevailing dividend policies, and the persistent unpredictability of tenures.

These operational complexities generate a crescendo, beckoning asset management

organizations to choreograph a harmonic response, a solution that not only answers but

transcends these nuanced challenges. It's a plea to re-calibrate the AMCs, a call for asset

management firms to fine-tune their operational instruments to ensure a flawless symphony

that resonates with intelligent investors' keen ears.

In FY2017-18, EBL1STMF had the highest annualized mean return of 28.59%, demonstrating

its great historical performance in the Bangladeshi mutual fund market. Sharpe Measures show

the market success of 16 funds, with ICB2NDNRB, EBL1STMF, and RELIANCE1 leading

the way. Treynor Measures highlights the exceptional performance of 20 funds, with

SEBL1STMF, AIBL1STIMF, and NLI1STMF shining out. (Desk, 2022)

The Bangladesh Securities and Exchange Commission (BSEC) has presented a breakthrough

regulatory paradigm shift to optimize the synergy between fund managers and investors. This

cutting-edge approach elevates the concentration on mutual fund management fees to a new

level, inextricably linked to the illusive worlds of performance and profitability. The imminent

official announcement by gazette notification casts a pall over this disruptive initiative,

promising a rebalancing of the mutual fund sector.

7
Recommendations
As financial data accumulates, strategic proposals develop. One should accept a sophisticated

portfolio optimization in which assets perform properly based on risk and return. Investigate

innovative diversification paradigms beyond standard notes as part of your asset allocation plan

gymnastics. Create a financial model that expertly balances risk and return while

simultaneously increasing investor awareness through investor education. Encourage a culture

of transparency among asset management firms, resulting in a harmonious melody of clarity

and openness. The confluence of these approaches results in a symphony of financial strategies

that will harmonize with the dynamic nuances of Bangladesh's mutual fund ecosystem.

Conclusion
Finally, this in-depth investigation of Bangladesh's mutual fund dynamics reveals a

complicated mosaic of financial complexities. The analytical findings give a realistic canvas

of budgetary insights. The array of proposals seeks to initiate a calibrated equilibrium as the

choreographed interplay of asset allocations and strategic manoeuvres develops. This

highlights the importance of honest investor education and meticulous risk management. The

sector of mutual funds is being actively modified to enhance the performance, profitability and

size of the sector to compete in a world run with finance, investments and knowledge of asset

management and the upward mobility of growth in all aspects.

8
References
Bank, B. (n.d.). Bangladesh Bank. Retrieved from Recent development in financial sector in

bangladesh: https://www.bb.org.bd/en/index.php/financialactivity/recentdev

Chowdhury, T. S. (2018). Journal of Accounting,Business and finance Research. Risk and Return Analysis

of Closed-End Mutual Fund in Bangladesh. Retrieved from

https://www.researchgate.net/profile/Md-Habibullah-

3/publication/344255339_Risk_and_Return_Analysis_of_Closed-

End_Mutual_Fund_in_Bangladesh/links/5f60fedf4585154dbbd5281a/Risk-and-Return-

Analysis-of-Closed-End-Mutual-Fund-in-Bangladesh.pdf?_sg%5B0%5D=star

ICMAB. (2020, 12 3). Mutual fund-ICMAB. Retrieved from http://www.icmab.org.bd/wp-

content/uploads/2020/03/1.Do-Mutual.pdf

Bangladesh Securities and Exchange Commission. (n.d.).

https://sec.gov.bd/home/mutualfunds

Desk, T. (2022, September 18). Mutual fund management fees to be fixed on performance

basis. Dhaka Tribune. https://www.dhakatribune.com/business/stock/276978/mutual-

fund-management-fees-to-be-fixed-on