BSEC for the first time okays two Exchange Traded Funds

The Bangladesh Securities and Exchange Commission (BSEC), the securities regulator, for the first time in the country’s capital market history, has approved two exchange-traded funds (ETFs).

One of them – FAM DG Bengal Tiger ETF – will be launched with an initial target size of Tk 50 crore, while the LB Multi-Asset Income ETF’s initial target size will be Tk100 crore, said a statement issued by the BSEC Thursday.

The stock regulator approved the registration of the funds, subject to their trust deeds being registered under the Registration Act of 1908.

The LB Multi Asset Income ETF will get an investment of Tk 10 crore from its sponsor LankaBangla Investments, and Tk 2 crore from the asset manager– LankaBangla Asset Management Ltd.

The remaining Tk 88 crore would be raised through the contributions of investors.

On the other hand, the local asset manager – Frontier Asset Management Ltd – and London-based emerging and frontier market investment management company – Dawn Global Management – would jointly sponsor the FAM DG Bengal Tiger Exchange Traded Fund.

Both the exchange-traded funds would be actively managed ones, instead of being those for imitating an index, meaning that the asset manager would select portfolio scrips in compliance with required regulations.

ETFs are similar in many ways to mutual funds but the key difference between the two is that the

ETF units are tradable in the secondary market, and third party firms are assigned as authorised participants.

Both the ETFs would be actively managed ones and are subjected to certain regulatory conditions, according to the BSEC statement.

Earlier, the BSEC gave consent in principle to introduce ETF in the capital market in exchange for a waiver of certain clauses of the Bangladesh Securities and Exchange Commission (Exchange Traded Fund) Rules, 2016.

ETFs are innovative instruments that provide exposure to an index or a basket of securities that trade on the exchange like a single stock and have a number of advantages over traditional open-ended index funds as they can be bought and sold on the exchange during trading hours at prices that are close to the NAV of the scheme.