78% unit holders want DBH First Mutual Fund to be open ended

The DBH First Mutual Fund's 78.42 percent unit holders have requested the trustee to call a unit holders' meeting to express their opinion to decide whether the fund should run for a tenure of ten more years as a closed ended one or convert it into an open ended one.

The trustee of the fund – Bangladesh General Insurance Company Ltd (BGIC) – had responded to the unit holders' request through seeking the securities regulators' approval for the significant meeting.

The BGIC sent a letter to the Bangladesh Securities and Exchange Commission (BSEC) on September 24 in this regard.

In the letter, the BGIC said LR Global Bangladesh Asset Management company Ltd, the asset manager of the fund, has informed on August 21 that the closed ended fund's tenure will be extended for another 10 years up to February 6, 2030.

Earlier in October last year, the BSEC allowed the closed ended funds to keep afloat for one more term similar to their current tenure.

If 75 percent of the fund unit holders oppose, the funds can be turned into open ended ones as per the mutual fund rules.

Industry people said most of the asset managers are interested in taking the one-off chance for tenure extension as it enables them to keep earning a fee against their professional investment management service for another decade.  

So, the asset manager of the DBH First Mutual Fund expressed their interest in this regard.

But, a majority of the DBH First Mutual fund's investors do not want the fund to remain closed ended, and they have requested the trustee to call a meeting.

Mutual Fund rules by the BSEC say: if three-fourths of the unit holders request the trustee to call a meeting with them, it is obliged to do so.

One of the 28 signatories, requesting for a unit holders' meeting, told The Business Standard that they are not comfortable to put their money locked up for the next decade, as in the stock exchange the closed ended funds' units are being traded at a very low price against underlying assets of the fund.

They rather seek the freedom to exit in any week securing a price equivalent to the current net asset of the fund expressed as net asset value at the market price.

Open ended funds with no predetermined end point are more convenient for investors as they offer a better exit route.

According to the Mutual Fund rules, the asset management company is bound to liquidate financial assets against surrendered units and pay the cash proceeds back to the exiting investors as soon as possible.

In August last, the LR Global Bangladesh Asset Management Company Ltd took such an opportunity to exit from their position of 7-14 percent holding in three open ended mutual funds managed by other asset managers.