You may have heard about mutual funds and wondering if there are any mutual funds in Nepal? Yes, there are more than a dozen of them. In this article, we will cover everything from a-z about mutual funds and types of mutual funds operating in Nepal.
A mutual fund is an investment fund. The main difference between your ordinary investment fund (capital) and mutual fund is mutual funds are managed by a team of professionals. A mutual fund collects money from investors to form their working capital. Such capital is used to purchase securities (stocks, bonds, fixed interest deposits, etc).
There are two types of mutual fund, they are Closed-end mutual fund and Open-end mutual fund.
Closed-end mutual funds have a fixed maturity date. Maturity date refers to the particular date up to which a mutual fund can operate. After the maturity period ends, the mutual fund will sell all the assets and distribute the collected money to the people (and/or organization) who have invested in that mutual fund. Most of the mutual funds in Nepal are a close-end type of mutual fund and have a maturity period of seven to ten years.
Another important thing about a closed-end mutual fund is that it has a fixed capital structure (or fixed fund). Most of the closed-end mutual funds operating in Nepal have around 1 Arba as their investment capital. This type of mutual fund starts collecting money from the interested general public through IPO (Initial Public Offering). Once the intended capital is met, it can not be bought and sold by the mutual fund. To help to buy and sell between investors, closed-end mutual funds are listed in Nepal Stock Exchange (Share market).
Open-end mutual fund, as the name suggests, is that type of mutual fund that does not have a maturity period. Since it does not have a maturity date, the open-end mutual fund’s capital is also not fixed. Interested people can buy or sell open-end mutual funds directly from the issuing company or allocated branch offices.
Based on investment philosophy, mutual funds can be categorized into equity (stock) funds, bonds funds, fixed-income funds, or a combination of all of them i.e. hybrid funds.
Equity funds invest their funds in buying and selling of stocks (shares) of listed companies. Bond funds and fixed-income funds invest their funds in (government and corporate) bonds and fixed interest deposit accounts respectively. A hybrid fund is the combination of all of the above. Hybrid funds invest in shares, bonds, and fixed income deposits. Based on your risk-taking appetite, you can invest accordingly.
Mutual funds in Nepal are issued by Commercial banks. Any commercial bank of Nepal that wishes to operate a mutual fund can do so by establishing a separate company to deal with the day to day operation of a mutual fund. This type of work is usually done through a Commercial bank’s special company called Capital. Till now, development banks in Nepal have not issued any mutual funds.
For any commercial bank that wishes to issue a mutual fund, it has to go through SEBON for approval. Bank has to submit necessary documents along with planned fund size, maturity date, investment philosophy, and experts profile, and potential operating cost. After approval, mutual funds will announce their issuance to the general public. The issuing company should have to invest around fifteen percent (15%) of total fund size as a mandatory rule and the remaining eighty-five percent (85%) will be issued to the general public and investment firms. Mutual funds in Nepal typically issue at 10 rupees per share.
Once the mutual fund operates, the health of a mutual fund is evaluated by the Net Asset Value (NAV). A mutual fund must publish their latest NAV monthly. If NAV is higher than the initial value of rupees 10 per share (let’s say 12 rupees) then we can be sure that the mutual fund is doing good. And, if NAC is below the initial value (let’s say 8 rupees) then we know that mutual fund is in the loss.
There are currently 18 Mutual Funds available in the country. Out of 18 mutual funds, 17 of them are closed-end mutual fund and 1 is an open-end mutual fund. They are:
Global IME Samunnat Scheme 1 (GIMES1) is a closed-end mutual fund being operated by Global IME Capital Limited. It has a fund size of Rs. 1 Arba with a maturation period of 7 years. It will be matured in 2023-03-04.
Laxmi Equity Fund (LEMF) is a closed-end mutual fund being operated by Laxmi Capital Market Limited. It has a fund size of Rs. 1.25 Arba with a maturation period of 7 years. It will be matured in 2024-06-12.
Laxmi Value Fund-1 (LVF1) is a closed-end mutual fund being operated by Laxmi Capital Market Limited. It has a fund size of Rs. 0.5 Arba with a maturation period of 7 years. It will be matured in 2020-03-25.
NIBL Pragati Fund (NIBLPF) is a closed-end mutual fund being operated by NIBL Ace Capital Limited. It has a fund size of Rs. 0.75 Arba with a maturation period of 7 years. It will be matured in 2024-01-11.
NIBL Samriddhi Fund 1 (NIBSF1) is a closed-end mutual fund being operated by NIBL Ace Capital Limited. It has a fund size of Rs. 1 Arba with a maturation period of 7 years. It will be matured in 2022-01-07.
NMB Hybrid Fund L-1 (NMBHF1) is a closed-end mutual fund being operated by NMB Capital Limited. It has a fund size of Rs. 1 Arba with a maturation period of 7 years. It will be matured in 2023-10-26.
Nabil Equity Fund (NEF) is a closed-end mutual fund being operated by Nabil Investment Banking Limited. It has a fund size of Rs. 1.25 Arba with a maturation period of 7 years. It will be matured in 2023-11-06.
Sanima Equity Fund (SAEF) is a closed-end mutual fund being operated by Sanima Capital Limited. It has a fund size of Rs. 1.3 Arba with a maturation period of 7 years. It will be matured in 2024-12-26.
Siddhartha Equity Fund (SEF) is a closed-end mutual fund being operated by Siddhartha Capital Limited. It has a fund size of Rs. 1.5 Arba with a maturation period of 10 years. It will be matured in 2027-11-08.
Citizens Mutual Fund-1 ( CMF1 ) is a closed-end mutual fund being operated by CBIL Capital Limited. It has a fund size of Rs. 0.82 Arba with a maturation period of 7 years. It will be matured in 2025-03-03.
NIC Asia Growth Fund (NICGF) is a closed-end mutual fund being operated by NIC Asia Capital Limited. It has a fund size of Rs. 0.8352 Arba with a maturation period of 7 years. It will be matured in 2025-03-12.
Nabil Balanced Fund-2 (NBF2) is a closed-end mutual fund being operated by Nabil Investment Banking Limited. It has a fund size of Rs. 1.2 Arba with a maturation period of 10 years. It will be matured in 2029-05-31.
Citizens Mutual Fund-2 (CMF2) is a closed-end mutual fund being operated by CBIL Capital Limited. It has a fund size of Rs. 1 Arba with a maturation period of 7 years. It will be matured in 2026-07-08.
NMB 50 is a closed-end mutual fund being operated by NMB Capital Limited. It has a fund size of Rs. 1.25 Arba with a maturation period of 7 years. It will be matured in 2026-09-01.
Siddhartha Investment Growth Scheme-2 (SIGS2) is a closed-end mutual fund being operated by Siddhartha Capital Limited. It has a fund size of Rs. 1.2 Arba with a maturation period of 10 years. It will be matured in 2029-08-26.
NIC ASIA Balance Fund (NICBF) is a closed-end mutual fund being operated by NIC Asia Capital Limited. It has a fund size of Rs. 0.755 Arba with a maturation period of 10 years. It will be matured in 2029-08-27.
Sunrise First Mutual Fund (SFMF) is a closed-end mutual fund being operated by Sunrise Capital Limited. It has a fund size of Rs. 0.86 Arba with a maturation period of 10 years. It will be matured in 2029-11-04.
NIBL Sahabhagita Fund is an Open-end mutual fund being operated by NIBL Ace Capital Limited.
There are lots of benefits of investing in a mutual fund. Some of the main benefits include:
As the mutual fund is around 10 rupees per share, people having small capital can invest in the stock exchange (share market) through mutual funds. Good companies’ share price is usually higher so they are beyond reach for small investors, so by investing in a mutual fund, they can be a shareholder of good companies.
Mutual funds are operated by a team of professionals who know when to do buying and selling. If you are a new investor or do not have time to read all the financial papers, latest news & updates, then the mutual fund is best for you.
Investment in mutual funds can be one of the best passive income in Nepal. Once you have invested you can be sure that your hard-earned money is in the hands of experts and they will try their best to make you more money.
The main drawback of investing in a mutual fund is the high operating expense including shares buying and selling commission charges, office expenses, etc. Also, a mutual fund is run by a team of professionals, they charge hefty fees for operating them. Even if the mutual fund is in loss, they will be getting salaries and benefits.
