HIMALAYAN NEWS SERVICE
KATHMANDU: Mutual funds will soon start operations as the capital market regulator has endorsed the Mutual Fund Guidelines providing functional clarity to them.
A board meeting of Securities Board of Nepal (Sebon) held recently had approved the Mutual Fund Guidelines which came into effect from beginning of the current fiscal year.
Though two mutual funds –– Siddhartha Mutual Fund and Nabil Mutual Fund –– had already obtained the licence, they were unable to start operations as basic yet essential aspects such as valuation, estimation and distribution of mutual fund schemes were not clear.
“Guideline will now speed up the operation of mutual funds as mutual funds could not have started operations in the absence of guidelines,” pointed out deputy director at Sebon Muktinath Shrestha.
The regulation had only paved the way for the establishment of companies interested to sponsor and operate mutual funds. “Most importantly the guideline has also spelt out way to calculate Net Asset Values (NAV) of the mutual funds to ensure that uniformity in calculation among different schemes is maintained,” said Shrestha.
NAV is calculated by dividing the sum of market price of the securities and net outstanding return by the total numbers of mutual fund units. NAV is the value of a collective investment fund such as mutual funds based on the market price of securities held in its portfolio.
The recently amended mutual fund regulation has allowed Non Resident Nepalis (NRN) to hold a stake in fund managing companies. Guideline has also allowed the sale of mutual fund units to NRNs provided they get prior approval from Sebon and from the central bank regarding foreign currency transaction.
Likewise, guideline has emphasised on building a distribution network of mutual funds across the country to involve prospective investors from all over. Sebon has considered mutual funds as the perfect instrument to increase the involvement of the public in the capital market. The existence of brokerage houses outside the valley is almost defunct due to a minimal number of transactions.
Mutual funds invest pooled cash of small investors and sell funds to the investors in accordance with the amount of money invested by them.
Siddhartha to launch services soon
KATHMANDU: Siddhartha Mutual Fund (SMF) is planning to launch its schemes and be fully operational around Dashain. “The progress regarding planning and preparation suggests that in three months we will be able to launch the schemes for the public,” said an official involved with SMF. The fund had obtained a licence in August 2011 and according to regulations if the fund fails to launch a scheme within one year, it can be scrapped.