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No dividends from 12 mutual funds

Gazi Towhid Ahmed
Twelve mutual funds failed to declare any dividend for the unit holders for the last fiscal year, due to a prolonged downtrend in share prices.
And the dividends announced by other funds were far from impressive, as the net asset value (NAV) of the units did not allow them to declare a healthy dividend.
The zero-dividend by the mutual funds was expected as their NAV dropped below their face values, according to fund managers.
"Fund managers failed to declare dividend for the unit holders due to a relentless fall in share prices since last year,” said Yawer Sayeed, managing director of AIMS of Bangladesh, a pioneer in private sector mutual fund operations.
The benchmark General Index of Dhaka Stock Exchange fell 26 percent last year, while the value and volume dropped by 74 percent and 59 percent respectively.
The NAV of a mutual fund shows its ability to give dividends to the unit holders. When the NAV of a fund rises beyond its face value, it is more able to give dividends.
A mutual fund is a professionally managed collective investment scheme that pools money from many investors and invests it in stocks, bonds and short-term money market instruments.
Of the 41 mutual funds currently listed on the premier bourse, 22 declared dividends, 12 announced zero dividend and three are yet to make any dividend declaration, while the rest of
the four have not completed their accounting year.
Sayeed said the stockmarket regulator allowed too many mutual funds to operate in the market without considering the capacity of the market.
“It created an unhealthy competition in the sector,” he said. “As a result, profitability of the funds declined sharply, especially in the bearish market.”
“A downtrend in the broad market can mainly be attributed to the underperformance of mutual funds," said Md Ashaduzaman Riadh, head of research at LankaBangla Securities.
"NAV of many funds went below their face value and they could not declare any dividend.”
Also many funds could not beat the market due to high exposure in different underperforming sectors which should have been predicted earlier as investors assume that those funds are managed by
skilled professionals, he said.
Only the fund managed by the Investment Corporation of Bangladesh (ICB), a state-owned enterprise, declared a handsome dividend.
The zero-dividend would cast a negative impact on the market, as retail investors have already started losing interest in mutual funds, especially those with poor performance, analysts said.
“Investors have lost enthusiasm for mutual funds and now prefer to take direct exposure in the underlying assets rather than passively holding those underperforming derivatives like instruments,” Riadh said.
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A total of 30 mutual funds traded below their NAV on the DSE in last week, the week before Eid holiday.
“The direction of the market and the professionalism of fund managers will be instrumental factors to revive the confidence of investors in the mutual fund sector in coming time,” Riadh said.
The mutual funds account for 1.85 percent of the total market capitalisation.
gazitowhid@gmail.com