Mutual Fund brings investment opportunity for common people

Securities Board of Nepal (Sebon) has brought the Mutual Fund Regulation effective from today, after a long exercise of almost four years.

The regulation passed by the finance ministry last week has formally paved the way for the entry of institutional investors (IIs) that will help stabilise the secondary market.

"Any organised institution floating public issue will have to separate minimum of five per cent of the primary issue for such Funds," said the Regulation that has given them the right to invest on listed shares at the Nespe, government issued debentures, central bank-issued Treasury Bills and other instruments of the monetary market.

Mutual Fund with a face value of Rs 10 per unit is the most suitable investment for a common man as it offers an opportunity to invest in a diversified, professionally-managed basket of securities at a relatively low cost.

A Mutual Fund is a trust that pools the savings of many small investors. The money thus collected is invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. "It can be traded at the Nepse and are convertible and has liquidity also," said chairman of the board Dr Surbir Poudyal. "The Funds are expected to fuel capital market by boosting the confidence of the investors."

"It will create institutional investors," he said, adding that Sebon is also working on to attract Foreign Institutional Investors (FIIs) in the long run.

"The Regulation has directed Fund's for diversification of portfolio to minimise their risk," Muktinath Shrestha, deputy director of the Sebon said, adding that any financial institution of Rs 1 billion paid up capital operating for last five years, has posted profit for last three years, and no negative networth can become the Fund Promoter.

Fund Supervisor that has atleast five supervisors with 15 years of experience will supervise the Assets Manager and Dipository. "The Assets Manager and Dipository must have Rs 100 million paid up capital each," Shrestha said, adding that Fund Promoter, Fund Supervisor, Assets Manager and Dipository will enter into separate agreements for the smooth operation of any Fund.

Credit Rating Agency

KATHMANDU: Chairman of the Sebon Dr Surbir Poudyal said that the board is also working for the establishment of Credit Rating Agency. "We are also planning regulation for the Credit Rating Agency," he said, adding that the establishment of Central Depository System Company is also at the final stage. "The CDS Company will help smoothen the trading at the Nepse.