Formation Of IFIC Bank 1st Mutual Fund:

Over the last decade, the Bangladesh capital market has grown rapidly in size and volume through the efforts of regulators, local exchanges, brokerages, merchant banks and other institutions. Yet the nature and composition of this growth has given rise to some structural problems, such as excessive volatility, speculation based investing, and unusual churn. The Mutual Fund sector offers a long-term solution to some of these structural issues and can play a key role to elevating the Bangladeshi capital market to the next level of growth. Firstly, mutual funds by virtue of being managed by professionals with the right expertise, usually invest on the basis of fundamental research and protect such investments from catastrophic loss through proper risk-management. Thus, mutual funds “invest” rather than “speculate” and can play a vital role in institutionalizing the market and act as a counterweight to excessive market volatility and manipulation. Secondly, mutual funds pool investment capital from thousands of retail investors and institutions that are not market specialists; by doing so mutual funds can help institutionalize the Bangladeshi stock market. With these benefits in mind, the regulatory authorities of our country are encouraging the growth of mutual funds.

Realizing the vital role that mutual funds can play in improving the capital market efficiency, IFIC Bank Limited, a leading first-generation commercial bank in Bangladesh has come forward and sponsored the IFIC Bank 1^st Mutual Fund. With an extensive network of corporate clients spanning all different sectors of the economy, and with a track record of involvement in the Bangladeshi capital markets, IFIC Bank has unique insights into the country’s financial sector.  The Bank strongly believes that the Bangladeshi stock market is entering a new growth phase, with healthy dynamics in both the demand and supply sides, and that mutual fund sponsorship offers the bank a responsible and profitable way of participating in this growth; the IFIC Bank 1^st Mutual Fund is the result.

In this endeavor, IFIC Bank has chosen two trusted partners with successful track record in the Bangladeshi mutual fund industry: RACE Management PCL as the Fund Manager and the Investment Corporation of Bangladesh (ICB) as the Trustee and Custodian of the Fund.

Formation of the Proposed Mutual Fund in Context of Present Market Scenario:

Since 2006, a number of factors have increased the popularity of stock market investing among Bangladeshi retail investors, including: rising income, low interest rates in traditional bank savings accounts, large stock investment gains, and increased media coverage. This exponential increase in demand is reflected in the 5x growth in average daily trading volume in the stock market during the last 2 years – from Tk. 200 croress in 2006-07 to its current Tk. 700 croress.

Despite this significant growth in investor participation in the Bangladeshi stock market, and the demand for professionally managed investment vehicles, the domestic mutual fund industry has not responded with adequate supply. With only 20 individual funds to choose from over the last twenty years, with about Tk. 2,000 croress in assets, the mutual fund industry has been slow to respond to current capital market realities and comprises only a small percentage of the total stock market investments.  As a result, existing mutual funds in the market are trading at significant premium to their NAVs while most of the recent launches have been significantly oversubscribed. To fulfill this large unsatisfied demand for mutual fund investments in Bangladesh, IFIC Bank is floating IFIC Bank 1^st Mutual Fund.

Advantages in Investing in IFIC Bank 1^st Mutual Fund:

Generally investment in mutual funds enjoys some additional advantages compared to investments made directly in other securities of the capital market. Investors of this mutual fund should be able to enjoy the following advantages.

1. The Fund will maintain a diversified portfolio which will lower the investment risk for investors.
2. The diversified portfolio will allow investors gain a broad exposure to the overall stock market which may not be possible at the individual level.
3. This Fund provides access to extensive local research and investment experience. The Fund Manager, RACE Management PCL has developed deep insight into the dynamics of the local capital markets.  Furthermore, RACE has a successful track record in the Bangladeshi stock market and is the fund manager of the first-ever commercial bank sponsored mutual fund in Bangladesh.
4. As the management of the investments in the Fund is outsourced to a professional Asset Management Company, investors will be relieved from any emotional stress associated with day-to-day management of individual investment portfolio. In fact, investment management usually requires a significant amount of time-consuming research and analyses to identify the highest-quality securities which may not be doable for the general investor and is, therefore, best left to professional investment managers.
5. The investors will be able to save in transaction cost as he/she has access to a larger number of securities by purchasing a single unit of IFIC Bank 1^st Mutual Fund.
6. Income will be tax free up to certain level, which is permitted as per Finance Act.
7. Investment in the Fund would qualify for investment tax credit under section 44(2) of the Income Tax Ordinance 1984.
8. Management and operation of Mutual Funds are subject to strict regulations from Bangladesh Bank, SEC and the Trustee. SEC regularly monitors the performance of such funds. The laws governing mutual funds require exhaustive disclosures to the regulator and general public and, as such mutual funds are one of the most transparent investment vehicles in Bangladesh.

In Bangladesh, the mutual funds enjoy a 10% (ten percent) reserved quota in all Initial Public Offerings (IPOs) giving unit holders access to the significantly high returns of IPOs in Bangladesh.

The constitution of the Fund:

IFIC Bank 1^st Mutual Fund has been constituted through a Trust Deed entered into between IFIC Bank Limited and Investment Corporation of Bangladesh on September 1, 2009 under the Trust Act, 1882 and Registration Act, 1908.

The Fund was registered by the SEC on September 6, 2009 under the সিকিউরিটিজ ও এক্সচেঞ্জ কমিশন (মিউচ্যুয়াল ফান্ড) বিধিমালা, ২০০১.

Life of the Fund:

The Fund is a closed-end mutual fund with a tenure of of 10 (Ten) years. As per BSEC’s Directive No BSEC/CMRRCD/2006-157/210/Admin/83, dated October 02, 2018, the tenure of the fund may be increased up to another 10 years so that the Fund can play its role to broaden the base of investment and develop the capital market.

The Trust Deed also provides the flexibility to the unit-holders to extend the tenure of the fund beyond the initial 10 years. 

Size, Face Value and Market Lot of the Fund:

• The initial Fund size is fixed at 100,000,000 (ten crores) units of Tk. 10 each totaling Tk. 1,000,000,000 (Taka one hundred crores).
• The Sponsor’s portion of the Fund is 25,000,000 (two and half crores) units of Tk. 10 each totaling Tk. 250,000,000 (Taka twenty five crores).
• Size of the Pre-IPO Private Placement is 55,000,000 (five and half crores) units of Tk. 10 each totaling Tk. 550,000,000 (Taka fifty five crores)
• Size of the Initial Public Offering (IPO) is 20,000,000 (two crores) units, each worth Tk. 10, totaling Tk. 200,000,000 (Taka twenty crores) available as public offering to general public, NRBs, Mutual Funds and collective investment schemes.