All You Need to Know About Mutual Funds (With List of Upcoming Issues)

There are a total of 17 close-ended mutual funds and 2 open-ended mutual funds listed in Nepal Stock exchange. 

There are close-ended mutual funds and there are open-ended mutual funds.

Close-end mutual fund: They issue a certain number of shares for a particular period of time. They cannot increase or decrease the number of shares after the issue. Closed-end mutual funds will mature over a predefined period. Its price is determined by supply and demand. Closed-end mutual funds are traded in exchange.

Open-end mutual funds: They can increase or decrease the number of shares according to the requirement and they don’t have a maturity period. Its price is determined by NAV. Open-end mutual funds are not traded in exchanges.

What you should know about mutual funds

All mutual funds are issued at a par value of Rs. 10 per share. A mutual fund is a professionally managed pool of money collected from investors to invest in securities. Securities mean investment assets like stocks, bonds, money market instruments, etc. Thus, after the collection of the fund, the fund managers invest in stocks, debentures, IPOs, and fixed deposits.

Based on the performance of their investment, the NAV of the funds is determined. According to Investopedia,

Net asset value (NAV) represents a fund's per share market value. It is the price at which investors buy ("bid price") fund shares from a fund company and sell them ("redemption price") to a fund company. It is derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding.

Moreover, there is another measure of a mutual fund's performance: its LTP. Investors closely observe the investment areas of the funds and the profitability. They then determine the market price of the fund via a free-market mechanism of supply and demand.

How Mutual Fund is a Win-Win Concept for Everybody

1) Diversify Risks

Mutual funds are required to invest in a wide variety of assets. This includes diversified shares of companies, public issues, bonds, debentures, etc. The resources deployed for research far outweigh those employed by an individual investor. After all, the fund managers certainly know a lot about company fundamentals than a single person can ever learn on his own.

For an amateur investor, investing in mutual funds and keeping a track of their investment portfolio is a great way to test the waters. Also, mutual funds will be a compelling investment alternative for those who want to reap the benefits of the stock market without being an active investor.

2) The money circulates in the stock market

The amount invested in mutual funds is reinvested into the market. This is because the majority of a mutual fund's investment is directed into equities themselves.

With the capital raised by the upcoming mutual fund issues, it can safely be said that the Nepalese securities market will be more matured than ever. A stock exchange grows with the increment of transaction volume and participation of investors, which includes participation from the big institutional investors to mom-and-pop (retail) investors.

Mutual Fund Already Approved

Kumari Capital is issuing 6.80 crore unit Kumari Equity Fund to the general public from Falgun 14, 2077. Out of the total Rs 80 crore worth of close-ended mutual fund, the issue manager will allocate 1.20 crore unit mutual fund to the sponsor institution i.e. Kumari bank and the rest will be issued to the general public.

The mutual fund will be managed by experienced fund managers Mr. Surya Prasad Koirala, Mr. Bharat Raj Pokhrel, Mr. Krishna Prasad Gyawali, Mr. Navraj Burlakoti, and Mr. Prajit Timalsina.

The fund managers have projected to maintain the NAV of 22.49 by the time the fund is matured and projects to provide 22% average yearly returns, as per the media statement.

Interested investors can apply for a minimum of 100 unit mutual funds to a maximum of 80 lakh units from Falgun 14, 28, 2077.

Click here for Offer Letter:

Mutual Fund Issues Under Preliminary Review

1) NIC Asia Select-30

Issue Quantity: 10 crores units
Issue Amount: Rs. 1,00,00,00,000
Issue Manager: NIC Asia Capital

2) Prabhu Select Fund

Issue Quantity: 10 crores units
Issue Amount: Rs. 1,00,00,00,000
Issue Manager: Prabhu Capital

3) NMB Saral Bachat Fund - E (Open-End)

Issue Quantity: 10 crores units
Issue Amount: Rs. 1,00,00,00,000
Issue Manager: NMB Capital

Issues Whose Applications Are Reviewed and Comment Sent

1) Siddhartha Systematic Investment Scheme (Open-End)

Issue Quantity: 2 crores units
Issue Amount: Rs. 20,00,00,000
Issue Manager: Siddhartha Capital

2) Global IME Balance Fund-I

Issue Quantity: 12 crore units
Issue Amount: Rs. 1,20,00,00,000
Issue Manager: Global IME Capital

Replied and Under Review

1) Sunrise Bluechip Fund

Issue Quantity: 10 crores units
Issue Amount: Rs. 1,00,00,00,000
Issue Manager: Sunrise Capital

2) NIBL Samriddhi Fund - II

Issue Quantity: 12 crore units
Issue Amount: Rs. 1,20,00,00,000
Issue Manager: NIBL Ace Capital

Conclusion

Rs. 6.6 Arba's worth of mutual fund issues are awaiting approval from SEBON. If we include the Kumari Equity Fund that has already declared its issue date, the amount is even higher.

This massive monetary amount will be poured into the Nepalese securities market in one way or another. There is a synergetic relationship between a bull market and capital. A bull market tends to attract further capital and investment from eager investors. On the other hand, further investment tends to generate a higher demand, which in turn propels a bull market. If this is not enough inspiration to invest in stocks, it certainly is to invest in mutual funds.