BSEC tells investors to assess Net Asset Value before investing in mutual funds

The Bangladesh Securities and Exchange Commission (BSEC) has urged investors to carefully check the Net Asset Value (NAV) per unit of mutual funds before making investment decisions, particularly when a fund’s market price differs significantly from its underlying asset value.

In a press release issued on October 5, the securities regulator said mutual funds collect money from investors and invest it in various financial instruments and assets, including shares, bonds and money-market instruments. The NAV represents the value of a fund’s assets after adjustment for its liabilities.

BSEC Executive Director and spokesperson Md Abul Kalam said investors would ultimately receive the NAV of their holdings if a mutual fund is liquidated or transformed.

“In case of any liquidation or transformation, investors will get the NAV. So, it is unusual for mutual funds to trade over their NAV,” Kalam said.

He said the regulator issued the advisory to protect investors’ interests.

“It is our responsibility to protect investor interest. That is why we have informed our investors,” he added.

The commission said NAV per unit is calculated by dividing a mutual fund’s net asset value by its total number of outstanding units.

The BSEC noted that a significant or abnormal gap can sometimes emerge between a mutual fund’s NAV per unit and its market price. Investors should therefore exercise particular caution when considering units trading at prices substantially above or below their NAV, it said.

Data cited in the release showed substantial differences between market prices and NAVs of several mutual funds.

Prime Finance First Mutual Fund was trading at 30.60 taka per unit against an NAV of 8.59 taka. CAPM IBBL Islamic Mutual Fund was trading at 17 taka against an NAV of 7.96 taka, while Phoenix Finance 1st Mutual Fund was priced at 17.50 taka compared with an NAV of 8.84 taka.

ICB AMCL Second Mutual Fund had a market price of 10 taka against an NAV of 9.55 taka, while Reliance One, the first scheme of Reliance Insurance Mutual Fund, was trading at 12.30 taka against an NAV of 11.62 taka.

The BSEC also pointed out that if a mutual fund is liquidated, investors cannot receive more than their proportionate share of the fund’s net assets.

The regulator advised investors to consider the latest published NAV per unit and other relevant information before purchasing mutual fund units.

It specifically cautioned investors against rushing to buy units simply because the market price of a particular mutual fund has risen significantly.

The commission urged investors to assess a fund’s financial condition, performance and other relevant information before making investment decisions.