First mutual fund for micro savers in pipeline

Aims of Bangladesh, the first private sector asset management company (AMC) in the country, is building an open-end mutual fund aiming for the deepest financial inclusion in the capital market.

Grameen Bank-Aims First Unit Fund (Micro-Savers Special Purpose Growth Scheme), would receive as small as Tk50 in investment from low-income people through mobile financial services, debit-credit cards, agent banking channels, said Yawer Sayeed, managing director of the AMC.

A mutual fund converges capital from many investors to build a big fund for investments in pre-announced sectors and generate returns for unit holders.

Sayeed, while speaking at The Business Standard's weekly capital market show TBS Markets on Saturday, said the banking sector has already seen a massive financial inclusion in Bangladesh, but unfortunately, it is yet to be in the capital market and the micro savers' mutual fund in the pipeline should play a significant role to fill the gap,

Merely 4-5 lakh investment accounts are driving the capital market higher and lower and the rest of the people are far away from the market. Aims, through the new mutual fund, wants to offer people from every walk of life a share in corporate earnings every year, regardless of how small they want to invest.

Grameen Bank, having a crore micro savers as its members, has already subscribed Tk100 crore to the fund as the sponsor, the trust deed has been signed and the prospectus for the public now awaits the capital market regulator's approval.

The public may buy the upcoming fund units at a face value of Tk10 each as soon as the subscription opens after securing the Bangladesh Securities and Exchange Commission (BSEC) nod.

The AMC would keep receiving investments under separate plans— one-off investments, systematic investment plan (SIP) — a certain amount at a regular interval, and also under cumulative investment plans (CIP) which is the reinvestment of dividend income into the same mutual fund.

However, the post-initial public offering price of the fund units would not be at face value. Instead, it would be based on the net asset value of the fund.

The power of long-term stable investments

Aims of Bangladesh, having around Tk500 crore funds under management in two listed closed-end mutual funds, has a tremendous track record of generating long-term wealth for its clients.

Grameen One Scheme Two mutual fund unit holders are getting 15% cash dividends this year, while its lowest ever 7% cash dividend in 2020 was the industry-highest then.

For the initial subscribers who bought the units at face value in 2008, the double-digit cash dividends each year alone are enough to earn more than the interest income from the popular fixed income alternatives--bank deposits, and national savings certificates. On top of that, the asset manager grew the initial Tk10 to near Tk20 now despite handsome cashouts every year.

Having paid 10% or more dividends per annum, the other fund managed by Aims – Reliance One mutual fund – has grown its net asset value per unit to Tk13.76.

"Past performance does not guarantee the future, but is a good indicator," Aims founder and Chief Executive Officer Sayeed said, adding that unlike the growth fund Grameen One Scheme Two, the new fund would be conservative in terms of investment strategy and will eye a better than bank-interest return for the micro and small savers.

Since the capital is hard-earned savings there would be no speculative trading and we will instead look for long-term stable investment opportunities.

From pre-IPO shares of some blue chip companies his funds are earnings cash dividends equal to the initial investments in one or two years and that continues over decades if investments made prudently, Sayeed said while explaining the power of low-cost, high potential long term investments.

Over 45% of the primary investors of the two existing funds under Aims' management still hold the initial units, demonstrating the investors' trust in the asset manager.

Even his competitor mutual funds are holding around one-fifth units of the funds and generating returns to pay dividends for their clients.

Aims would offer loyalty based dividend programs – paying better dividends to those who hold units for long – to inspire purpose-based long term mutual fund investments, would offer gift cards to popularise mutual funds in social life as is seen in other countries.

The asset manager has already entered top tier banks, mobile financial service providers and debit-credit card providers for micro transactions partnership alongside investing a lot for its own technology platform to automate everything.    

The micro savers' mutual fund will publish its daily net asset value and investors can buy and sell them based on the daily rates.

"Savings: The sustainable source of durable capital"

Praying for black money whitening opportunities through stock market investments, channelling banking industry surplus funds in stocks, or more margin loans to give the secondary market lifelines during downswings barely help avert market volatility.

Sayeed believes savings is the sustainable source of durable capital as the funds are more inclined to long term returns instead of short term speculative trading. And, the capital market of Bangladesh is likely to attract more of the stable funds through promoting mutual funds that would enable millions of micro and small savers' inputs into the market every month, year.

For example, Grameen Bank, the sponsor of the financial inclusion mutual fund, has a crore members and if each of the members invest Tk100 a month through a mutual fund SIP, the market would get Tk100 crore funds a month and over Tk1,000 crore a year.

Exploring all the ways of financial inclusion in the capital market can help build the investor base a stable market needs, Aims CEO went on saying.

In neighbouring India, the mutual fund industry, bigger than Bangladesh's GDP, has over 13 crore clients and 10.5 crore of them are the hardworking people from rural areas or small towns. The asset managers create generational wealth for the clients and help the market stabilise.

Bangladesh capital market needs some regulations modifications for the needed revolution, Sayeed opined mentioning an example – here in Bangladesh, any capital market investment must be through a beneficiary owners (BO) account under the Central Depository Bangladesh Ltd that needs Tk500 a year in maintenance fees and a mandatory bank account mandatory for a BO adds to the costs.

"Micro savers will not pay for that or open their BO accounts. We requested the BSEC to allow us to operate the micro savers fund under an omnibus account, like the rest of the world," Sayeed said, adding that the regulators would have all access to its sub-register database for the micro details of the fund data.