Though mutual funds are safer investment tools, people still have to be well informed of the background of sponsors and fund managers before investing in any scheme, according to Pravin Raman Parajuli, chief executive of Nabil Investment — a merchant banking subsidiary of Nabil Bank — which will launch the scheme ‘Nabil Balanced Fund I’ on March 20-24.
Their risk appetite and professional strength are key, he said, adding that Nabil Investment — the fund manager for the five-year close ended mutual fund scheme ‘Nabil Balanced Fund I’ — which is floating the scheme worth Rs 600 million has sound professional strength to manage the scheme, apart from its sound technical and fundamental background.
“Nabil Investment that has been licensed by Securities Board of Nepal to work as a fund manager and depository for the scheme has a three-year experience in professional portfolio management besides merchant banking, and the backing of Nabil Bank, the sponsor of the scheme that has an experience of three decades,” he said. “Our main target is to mitigate risk and maximise profit for our investors by professionally managing the fund.”
However, the domestic secondary market that is dominated by banks and financial institutions offers limited opportunity for mutual funds to diversify their portfolio. “Limited instruments and lack of sectoral diversification leading to concentration risk are definitely the challenges but more real sector companies entering the secondary market will expand the market,” opined Parajuli.
He was hopeful that the capital market regulator will enhance its capacity and become more dynamic in the wake of more mutual funds being floated in the market and attract more real sector companies with sound corporate governance to expand the secondary market. “The depth and expansion of the secondary market will help in the growth of mutual funds in the future.”
“Besides a strong and professional regulator, government policies will also help chart the future course of mutual funds that are the best instruments to mobilise small investments,” he said.
The general public will be more attracted to mutual funds if the government assures them of tax exemption as is the international practice, Parajuli added.
An investor can invest a minimum of Rs 1,000 on Nabil Balanced Fund I as one can apply for a minimum of 100 units that has a face value of Rs 10 per unit. The units will be listed at Nepal Stock Exchange (Nepse) for trading and can be easily liquidated.