Mutual Fund guideline in offing
ShareSansar, August 14:
Kavita Nayaju
The capital market regulator will spell out the way for the calculation of Net Asset Values (NAV) of the Mutual Funds in the guidelines for the Mutual Funds that is in offing.
“Though Net Asset Values has a standard formula but as a regulator Sebon has to make sure that Mutual Funds follow the standard criteria to calculate it so that investors will not be taken for ride,” said director of Sebon Niraj Giri.
“It will also ensure the uniformity in calculation among different Mutual Fund schemes,’ he added.
Net Asset Value is the value of a collective investment fund such as Mutual Funds based on the market price of securities held in its portfolio. It is basically calculated by subtracting liabilities from the value of a Mutual Fund’s securities and other items of value and dividing this by the number of outstanding shares.
The capital market regulator is preparing guidelines for the Mutual Funds to provide functional clarity to them. They will be starting their business in the near future as some of the banks have already applied for the approval.
Some four of the commercial banks have already applied for the license to start Mutual Fund. Siddhartha Bank was the first one soon followed by NMB Bank, Nabil Bank and Laxmi Bank.
Mutual Fund Regulation 2067 has only specified the requirements for the starting of Mutual Funds paving the way for the establishment of companies interested to sponsor and operate mutual funds.
“The regulator still needs to clarify the conditions and rules to be followed depending on the type of Mutual Funds — open ended or closed ended — types of schemes,” Giri said, adding that the guidelines will explain these.
Mutual Funds invest pooled cash of small investors to meet the Fund’s stated investment objective — especially in stocks, bonds and money market instruments.
These Funds issue units to the investors in accordance with amount of money invested by them. The profits or losses are shared by the investors in proportion to their investments.
Mutual Funds can trade at Net Asset Value or their price can be at a premium or discount to Net Asset Value. The collective investment fund like Mutual Fund is considered to be best investment tool for people, who can invest in a diversified, professionally managed basket of securities at a relatively low cost.
The capital market regulator had come up with the official regulation for Mutual Fund in August 2010, however, regulatory difficulty imposed by the central bank forbade the commercial banks to sponsor these funds.
On February, central bank also opened up commercial banks to start Mutual Funds through subsidiary companies.
“We are going through their documents and award the license, if they satisfy the criteria according to the regulation,” Giri added.
