Home ›› 27 Aug 2021 ›› Front
Mutual Funds (MFs) unitholders have finally heaved a sigh of relief as they started getting healthy dividends this year, thanks to bullish stocks business after nearly a decade.
Until Wednesday (August 25), 31 out of 37 listed MFs declared rich dividends for FY21 compared to Fy20.
Twenty MFs, who declared no dividends for unitholders for FY20, announced dividends ranging from 4 per cent to 15 per cent in FY21.
NLI First Mutual Fund (NLI1STMF) paid 17.5 per cent dividends, the highest among MFs this year. It had declared 5 per cent dividends last year.
Why MFs offer better dividends?
Analysts say mutual funds registered good returns from the capital market rising for the past year, enabling them to pay higher dividends.
They say MFs’ incomes rise if the market sees an upward trend, but some analysts disagree, arguing that income depends on the fund manager’s skills.
Stock market regulator Bangladesh Securities and Exchange Commission (BSEC) previously revealed plans to take incentive measures to increase efficiency in this regard. It said the commission was working to ensure that mutual funds could pay regular dividends.
Dhaka University’s economics Professor Dr Mohammed Helal Uddin told The Business Post that these funds pay dividends to unitholders from profits earned by investing in different shares.
An upbeat capital market saw its main index, DSEX, rise by 40 per cent this year, leading to increasing share prices and asset values.
On July 2, at the beginning of FY20-21, DSEX was at 3,986 points with a daily turnover of Tk 81 crore while market capitalisation was Tk 3,11,775 crore.
On the last day of FY21, on July 30, the broad index stood at 6,150, which increased by 54 per cent. Daily turnover increased more than 17 times and stood at Tk 1,408 crore. The market capitalisation grew 65 per cent and stood at Tk 5,14,282 crore.
Responding to a question, capital market analyst Prof Helal said mutual funds usually invest more in bank shares. A positive market trend pushed up the banks’ share prices more this year than last year. It is one of the reasons for the good return of MFs.
Former president of DBA (DSE Brokers Association of Bangladesh) Mostaq Ahmed Sadek told The Business Post that many MFs bought huge shares in 2010. Expected dividends were not available for so long.
He said that if mutual funds could continue to pay such dividends, investors’ confidence in them would increase. The condition of mutual funds was not good at some point. Yet, the unit price of many funds is below face value.
In response to a question, he said that such a policy would not work on the basis that mutual funds will do well just because the market is upward.
Emphasising the skills of the fund managers, he said that in any market situation, they should manage the fund and continue to pay dividends to the investors even if it is a small amount.
Shahidul Islam, Chief Executive Officer of VIPB Asset Management Company, told The Business Post, mutual funds are closely linked to the growth of the capital market. Here the market is more important than the skills of asset management.
Since the market was not good in FY20, the mutual funds were at a loss and could not pay dividends.
He said 90 per cent of mutual funds invest in shares. So when the share prices rise, the income of the funds increased naturally.
BSEC is encouraging mutual funds to pay more cash dividends. It is working to increase the market capitalisation of these funds to 20 per cent of the total market capitalisation in the future.
BSEC spokesperson Rezaul Karim told The Business Post that mutual funds are also doing well this year as the market is good.
However, the commission has plans to reduce or increase the commission of fund managers or issue managers so that they can show efficiency in any market situation.
The commission rate will be increased for those who show good skills, pay regular dividends or high dividends. Those who are lagging will also be encouraged to improve their skills.
As a result, the number of investors, especially those who are new and not accustomed to taking risks, will increase.
According to the DSE data, market capitalisation of the mutual fund is Tk 5,068 crore as of August 26, which is 0.91 per cent of total market capitalisation. The total market cap of the stock market is over Tk 5,57,509 crore.
