The Mutual Fund Fact-Sheet
The factsheet is a document that puts up all the information related to a fund/scheme. By and large, everything that you need to know before investing in a particular fund is available in the fund fact sheet.
Before we get to the fund’s fact sheet, it is essential to get a grip on how wide and deep the Indian Mutual fund industry is. The discussion will help you understand the length and breadth of the mutual fund industry –
ICB (Investment Corporation Bangladesh) is the first institution in Bangladesh to establish mutual funds. Even though the sector began its journey in 1980, the first two decades were marked by sluggish growth. Currently, 37 mutual funds are listed on both the Dhaka and Chittagong stock markets. The ICB Asset Management Company Ltd manages nine of the 37 close-end mutual funds. In addition, there are currently 48 open-end mutual funds in the United States.
As of 2021, Bangladesh has a mutual fund industry of roughly BDT 15,000 crore. The total Net Asset Value of all close-end mutual funds listed on the DSE and CSE was BDT 6087.23 crores at the end of June 2019, compared to BDT 6152.46 crores in June 2018. The total asset under management (AUM) of Mutual Funds in Bangladesh represents only 0.9% of the market capitalization. The percentage is approximately 13% in India, Pakistan, and Nepal. In comparison to GDP, Bangladesh's AUM is barely 0.3%, while India's is 16.8% and Pakistan's is 1.5%.
The fund fact sheet
A mutual fund scheme is managed and maintained by an asset management company (AMC). As long as BSEC has given their approval, an AMC is permitted to conduct a variety of schemes. In essence, a mutual fund scheme is a fund with a specified investing goal. The fund's declared objective is its investment objective. For instance, the investment goal of a mutual fund scheme could be to invest in the top 100 large-cap or small-cap companies in the nation, or it could be a combination of both, and so on. The fund manager is expected to uphold this mandate for the duration of the fund's existence. The investment objective is stated at the time the fund is established.
So, let's choose a fund fact sheet and explore the data that is provided. Here’s a snapshot of IDLC Asset Management Limited’s fact sheet-
As you can see, the investment objective says ‘To generate capital appreciation along with current income from a combined portfolios of equity, debt and money market instruments.’
From this, we can infer –
- The fund manager intends to have a diversified portfolio; therefore it is not focused on a specific sector
- The exit and entry loads signify that it’s an open-ended mutual fund. If an investor sells the fund in less than 90 calendar days of purchase, the AMC will keep 3% as commission. The discount below the NAV that is paid by unitholder when he / she redeems units from the Mutual Fund Scheme is called the exit load.
When an AMC creates a fund, they can choose to let it run for an established amount of time or for all time. For instance, if you started a fund today and let it operate for three years, at the conclusion of the third year, the fund would no longer exist, and the investor would be entitled to get his money back (together with any profits or losses). Funds having a time limit like this are referred to as "closed ended funds". A fund is referred to as being open-ended if it has no expiration date.
Other fund facts
The fund fact sheet presents a lot more interesting data points. We will also use this time to learn about some of the most important terms used in the world of mutual funds.
Related parties
Sponsor: The sponsor initiates the mutual fund by subscribing minimum 10% of the total fund size. The Sponsor appoints the trustee, Custodian and the Asset Management Company.
Trustees: The board of trustees are responsible for protecting the interests of the unit holders. It is an independent body having received the trusteeship license from the regulator and is not associated with the Sponsor or the Asset Management Company.
Custodian: The custodian is responsible for physical handling and safe keeping of the assets managed by the Asset Management Company. They receive the Custodian license from the regulator and are independent of the Sponsor or the Asset Management Company.
Asset Manager: The Asset Manager is responsible for floating and managing the mutual funds in accordance with Bangladesh Securities and Exchange Commission regulations and guidelines provided by the Trustee.
Allotment date – This is the date that the fund started doing business. You can tell how old a fund is by how long it has been around. It doesn't matter, but the older the fund is, the easier it is to analyze compared to a new fund. From July 20, 2017 to December 31, 2022
Dividend payout – When the fund manager buys a company's stock and the company pays a dividend, the AMC gets this dividend. Since the investors own the money in the AMC, this dividend belongs to the investors as well. The amount of dividends you can get from the AMC depends on how much you've put into the fund. The AMC gives you two choices: you can take this dividend out of your account or you can use the money to buy more units of the fund. The dividend payout option lets you take out the dividend payments as and when they come in.
At the closing of each accounting year, the IDLC Balanced Fund will release a minimum of 70% of its realized revenue as dividends.
Next, let’s talk about the load structure of the fund. The load structure is essentially the amount of money, in percentage terms; you will have to pay in case you wish to withdraw from the fund. As you can see, there are two types of load structure –
Entry load – This is no longer applicable. However, years ago, you’d have to pay a percentage for investing your money in a mutual fund.
Exit load – This is the amount of money you will have to pay at the time of withdrawal. As you can see, there is a 3% load if you wish to withdraw before the completion of 90 days since purchase.
