Rs.16.35 Arba Worth of Mutual Funds in SEBON's Pipeline, Only 3 Funds Have Been Issued This FY So Far

Investment in mutual funds has been an attractive choice internationally, since the introduction of the investment vehicle in response to the financial crisis of 1772-1773 from the Dutch republic. The attraction in mutual funds is mainly because of the minimal seed funds required in the beginning. The funds are managed by professionals and investors are free from the hassles of security selection and analysis.

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: The fund can increase or decrease the number of shares according to the requirement and they don’t have a maturity period. Open-end mutual funds are not traded in exchanges, and their units can only be traded via the fund manager.

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.

Mutual Funds in Nepal

There are a total of 25 close-ended mutual funds and 4 open-ended funds in Nepal. Meanwhile, six mutual fund schemes of various fund managers have already matured.

The close-ended mutual funds have a combined fund size of Rs. 20,802,823,600. NIBL Samriddhi Fund - 2 (NIBSF2) and Siddhartha Equity Fund (SEF) are the biggest among them, with a fund size of Rs. 1,500,000,000. Meanwhile, Citizens Mutual Fund - 2 (CMF2), with a fund size of Rs. 560,000,000, is the smallest closed-end mutual fund.

Mutual Funds in Pipeline

Furthermore, there still are many mutual fund schemes in SEBON's pipeline. 11 are under preliminary review and 4 are under review after receiving SEBON's reply. The mutual funds in the preliminary review category are worth Rs. 12,450,000,000 altogether. Meanwhile, those in the replied and under review are worth Rs. 3,900,000,000 altogether.

Only 3 mutual funds have been issued to the public so far this fiscal year. The most-recent issue concluded around six months ago.