5.

Fund Management Styles

Fund management involves the professional handling of investment portfolios to meet specific
financial objectives. The approach taken by fund managers varies depending on the goals of the
fund, the risk tolerance of investors, and prevailing market conditions (Lanturn, n.d.;
WallStreetMojo, n.d.):

1.​ Active Management: Active management involves fund managers making strategic
decisions to select securities they believe will outperform the market or a chosen
benchmark. This style relies on in-depth research, market analysis, and expert judgment.
While active management can potentially generate higher returns, it comes with higher
fees and greater risks due to frequent trading and reliance on market timing.
2.​ Passive Management: Passive management aims to replicate the performance of a
specific market index, such as the S&P 500. Unlike active management, passive funds
require minimal intervention, resulting in lower management fees. This approach appeals
to investors who prioritize cost-effectiveness and steady returns, as it eliminates the risk
of underperforming the benchmark while also foregoing the chance to outperform it.
3.​ Growth-Oriented Management: Growth-oriented management focuses on investing in
companies that exhibit strong potential for earnings growth, often at a faster rate than the
overall market. These companies typically reinvest profits to expand their operations,
making them attractive for long-term capital appreciation. However, this approach carries
higher risks, as growth stocks are more sensitive to market fluctuations and economic
downturns.
4.​ Growth at a Reasonable Price (GARP) Management: GARP combines elements of
both growth and value investing. Managers look for companies with solid growth
potential that are not excessively overvalued. The strategy aims to strike a balance
between growth opportunities and reasonable valuations, mitigating some of the risks
associated with pure growth investing.
5.​ Value-Oriented Management: Value-oriented management targets undervalued stocks
that are believed to be trading below their intrinsic value. Fund managers following this
style carefully analyze company fundamentals, seeking opportunities for long-term gains
 once the market corrects the mispricing. This style is often considered less risky than
growth management but may require a longer time horizon for results.
6.​ Quantitative Management: Quantitative management relies on mathematical models,
algorithms, and statistical analysis to make investment decisions. By analyzing large
volumes of data, fund managers can identify patterns and trends, optimizing portfolio
performance with minimal human bias. This style is particularly effective for managing
complex and large-scale portfolios, but its success depends heavily on the quality of the
underlying models.
7.​ Fundamental Style: The fundamental style emphasizes deep analysis of a company's
financial statements, industry position, and economic conditions. Managers assess
intrinsic value to make long-term investment decisions, relying on qualitative and
quantitative research to identify quality assets.
8.​ Risk Factor Control Style: This style prioritizes managing and mitigating risks by
focusing on factors like volatility, interest rates, and sector exposure. Fund managers
optimize portfolios to reduce vulnerability to unpredictable market events, ensuring
stability and resilience in challenging conditions.
9.​ Bottom-Up Style: Bottom-up investing focuses on analyzing individual companies
rather than broader market trends. Fund managers evaluate a company’s financial health,
management quality, and growth potential, building portfolios based on the strength of
specific businesses rather than sector or macroeconomic predictions.
10.​Top-Down Investing: Top-down investing starts with analyzing macroeconomic factors,
such as global market trends, geopolitical events, and sector performance, to determine
investment opportunities. Once promising sectors or industries are identified, fund
managers drill down to select specific securities within those areas.

The choice of fund management style significantly impacts investment outcomes. Active
management offers opportunities for higher returns, while passive management provides a
cost-effective approach to market performance. Other styles, like growth, value, and quantitative
management, cater to specific investor needs and goals.
6. Investment Policies and Restrictions

The mutual fund industry in Bangladesh operates under a regulatory framework designed to
protect investors and ensure market stability. These policies and restrictions are established by
the Bangladesh Securities and Exchange Commission (BSEC), which supervises and regulates
mutual funds in the country.

6.1 Key Investment Policies

1.​ Asset Allocation Rules: Mutual funds in Bangladesh are required to diversify their
investments across various asset classes, including equities, bonds, and money market
instruments. According to the BSEC Mutual Fund Rules, funds must limit their exposure
to individual securities to reduce concentration risk (BSEC, 2020).
2.​ Dividend Distribution: Closed-end mutual funds are mandated to distribute a minimum
percentage of their income as dividends. For instance, many funds in Bangladesh are
required to pay out at least 70% of their realized income annually to investors (IDLC,
2023).
3.​ Investment in Government Securities: Mutual funds are encouraged to invest in
government treasury bonds and bills, which are considered safe and stable. This helps
reduce portfolio risk while supporting the country’s fiscal policy objectives
(LankaBangla, 2023).
4.​ Foreign Investment Limits: Bangladeshi mutual funds are restricted in their ability to
invest in foreign securities. Most investments are focused on domestic markets, ensuring
that funds contribute to the growth of the local economy (BSEC, 2020).
5.​ Restriction on Short Selling and Speculative Activities: Mutual funds in Bangladesh
are prohibited from engaging in speculative trading practices like short selling. This
policy is designed to protect investors from high-risk strategies and ensure the stability of
the financial markets (Dhaka Tribune, 2023).
6.2 Regulatory Restrictions

1.​ Expense Ratios: The BSEC limits the expense ratio of mutual funds to ensure
affordability for retail investors. This includes restrictions on management fees,
administrative costs, and other operational expenses (BSEC, 2020).
2.​ Initial Public Offering (IPO) Participation: Mutual funds in Bangladesh actively
participate in IPOs, but their allocation is subject to regulatory limits to ensure fair
distribution of shares among institutional and retail investors (IDLC, 2023).
3.​ Leverage and Borrowing: Mutual funds are restricted in their ability to use leverage or
borrow funds for investment purposes. This is aimed at preventing excessive risk-taking
and protecting investors from potential losses (BSEC, 2020).
4.​ Transparency and Reporting: Fund managers are required to disclose detailed
information about their portfolios, performance, and investment strategies in quarterly
and annual reports. These disclosures ensure transparency and help investors make
informed decisions (LankaBangla, 2023).
5.​ Ethical Investment Guidelines: Mutual funds must adhere to ethical investment
practices, avoiding companies involved in illegal or socially harmful activities. This
aligns with broader efforts to promote responsible investing in the country (Dhaka
Tribune, 2023).

Investment policies and restrictions in Bangladesh are aimed at fostering a secure and transparent
environment for mutual fund investors. While regulatory frameworks ensure stability, they also
impose certain limitations on fund managers, such as restrictions on foreign investments and
speculative activities. These policies reflect the country's broader economic goals, emphasizing
investor protection and sustainable market growth.
References

Bangladesh Securities and Exchange Commission (BSEC). (2020). Mutual Fund Rules.
Retrieved from http://www.sec.gov.bd

Dhaka Tribune. (2023). Overview of the mutual fund market in Bangladesh. Retrieved from
https://www.dhakatribune.com

IDLC Finance Limited. (2023). Mutual funds in Bangladesh: Current performance and
opportunities. Retrieved from https://www.idlc.com

LankaBangla Finance Limited. (2023). Investment strategies for mutual funds. Retrieved from
https://www.lankabangla.com

Lanturn. (n.d.). The basics of fund management explained. Retrieved from

https://www.lanturn.com/sg/blog/the-basics-of-fund-management-explained

WallStreetMojo. (n.d.). Fund management. Retrieved from

https://www.wallstreetmojo.com/fund-management/