- What is a Mutual Fund?
A mutual fund (MF) is a separate legal entity which collects savings from small individual investors and institutions in exchange of partial ownership in that particular MF which is called a Unit (or certificate of ownership in a MF). The accumulated fund raised under a MF is then managed by an asset management company that uses its investment management expertise to invest the fund in a diversified portfolio of IPOs, stocks, bonds and other kinds of permissible investment securities. By doing so, the MF generates investment return over time which is then distributed to all the investors (or unitholders) of the fund in the form of dividends and capital gain/loss. An investor in mutual fund may sell his/her units in the stock market at quoted price or surrender them at net asset value to liquidate the investments.
- What are the types of Mutual Fund?
Mutual funds are of two types: Open-end and Close-end.
Open-end funds (also called unit funds) remain open to take new capital from investors over time. Open-end funds don’t have a finite life or tenure; however, an investor or unitholder can surrender or sell his/her units anytime through the asset manager at prevailing net asset value (NAV).
Closed-end funds, on the other hand, are listed in the stock exchange and have a finite life of 10 years in Bangladesh. These kind of fund takes capital from investors only at the time of fund inception (or IPO) and gives the capital back to its investors at the end of the fixed tenure. Since closed-end funds are listed in the stock exchange – their investors can sell the units in the live market at prevailing market prices (which can be significantly different from net asset value).
- What are the common benefits of investing in a Mutual Fund?
The benefits of investing in a Mutual Fund are
- Investment expertise: Mutual Funds are managed by professional fund managers who have sufficient expertise and experience in picking the right stocks/ bonds/ instruments to build a diversified portfolio for generating competitive investment return with limited risk-taking.
- Better diversification: They efficiently diversify the portfolio by making investment in stocks, bonds, FDRs, Real estates, alternative assets etc. which is tough for a small capital holder.
- IPO subscriptions: In Bangladesh, mutual funds enjoy a 10% (ten percent) reserved quota for all Initial Public Offerings (IPOs). IPOs in Bangladesh have historically posted much better time-weighted-returns to subscribers and therefore, Unit holders’ access to the reserved IPO subscription quota through mutual fund investments offer value not available otherwise.
- Economics of scale in trading: Since mutual funds buy and sell securities in large volumes, transaction costs on a per unit basis is much lower than what retail investors may incur if they buy or sell shares through stock brokers.
- Tax benefits: Investors are eligible for tax rebate depending on the amount invested. Asset Management Companies are required to distribute a percentage of the earning (refer to fund-specific prospectus for exact % and in case of EDGE Bangladesh Mutual Fund, 70% of annual realized earnings) as dividends to investors, out of which up to BDT 25,000 is tax-free. In addition, profits generated by the mutual fund are also tax exempted. More importantly, investments in mutual funds qualify for investment allowance and therefore, lowers tax liability for individual investors.
- Liquidity: Investors can buy and sell units of open-end fund at prevailing NAV at their convenient time. In other words, open-end funds are liquid income generative investment alternative. However, long-term investments in mutual funds generally yield better investment results than short-term ones.
- How does a mutual fund generate profits?
Assets gathered under a mutual fund is invested in different stocks/ bonds/ IPOs/ other permissible securities. As the market prices of these underlying invested stocks, bonds and securities change over time, the mutual fund makes money. Mutual fund also earns from dividend and interest income from the invested securities.
- What is the return can I expect?
There is no guaranteed return from investing in traditional mutual funds. Expected return from a mutual fund generally depends on two things- a) quality of the asset management company, and b) risk/return profile of the underlying investment strategy or portfolio (which is provided in the fund prospectus and portfolio statement). However, well managed funds in Bangladesh have historical track record of generating more than 15% annualized return over long-term. Please note that such historical performance may not sustain and does not provide any guidance on return expectation from any mutual funds.
- How is investor interest protected in a mutual fund?
Every mutual fund is registered with the Bangladesh Securities & Exchange Commission (BSEC) as a separate legal entity whose financial performance is audited by an independent auditor annually. Each MF has a Trustee, mostly chosen from renowned financial institutions, to look after the interest of the fund investors. There is a Custodian, too, which ensures that all the assets under the mutual fund is kept safe all the time. The asset manager files detail information on the fund activities along with rationale with both the BSEC and the fund Trustee under the rigorous regulatory framework, defined by BSEC’s Mutual Fund Rules 2001, the Trust Deed of the fund and other regulatory directives that come out from time to time.
For the EDGE Bangladesh Mutual Fund, for example, the asset manager (EDGE AMC Limited) publishes the Net Asset Value (NAV) per unit in the company’s Facebook page, its website on every Thursday and on The Financial Express on every Sunday. We also submit Portfolio Statement to the Trustee fortnightly and publish Financial Statements quarterly. All our activities and performances are fully transparent and verified by independent professional service providers like auditor, Trustee and Custodian.
- What is the minimum amount one can invest?
Eligible individual investor can become unit holder by investing minimum of BDT 5,000. For Institution the minimum amount is BDT 50,000.
- How much is the management fee? How do the investors in mutual funds pay fees against the services?
Asset management companies earn an annual management fees which is denominated as a % of total asset under management (or fund size) of the mutual fund. BSEC’s Mutual Fund Rules, 2001 defines the asset management fees structure as given below-
|Asset Under Management (AUM) (in Crore)||Management Fee (as % of AUM, charged annually)|
|> 5||2.5% p.a|
Investors in mutual fund do not have to pay the fees explicitly – the fees get deducted from the net asset value of the fund over time.
- How can I make profit from investing in Mutual Fund?
The Mutual Fund will take your savings to invest in a portfolio of stocks/ bonds/ other permissible securities. This portfolio of stocks/ bonds/ other securities will go up and down in value as the market prices change in the stock market or the companies pay dividends and interests. Asset management companies like EDGE AMC undertake rigorous investment research on the companies/stocks/ bonds before adding them in the portfolio to maximize the gain from security trading and dividend/ interest income to the fund. Such gains and incomes increase the value of the fund as a whole and as the unitholders are the owners of the fund, their value of investments in the mutual fund also increases automatically.
For example, a Mutual Fund takes 10 million Taka from 50 unitholders to form a fund of 500 million Taka. Hence at the inception of the fund each of the unitholders owns 2% of the fund (derived by dividing a particular unitholder’s investment size with the total size of the fund- by dividing 10 million Taka with 500 million Taka in this instance). Then, after diligent research, the asset manager invests the total fund of 500 million Taka in a portfolio of stocks/ bonds and other securities. The portfolio, after one year from the starting date, generates 12% return and hence, the total value of the assets under the Mutual Fund becomes 560 million Taka with a gain of 60 million Taka (500 million Taka* 12% holding period return). An unitholder who invested at the very inception of the fund still owns the same 2% value of the fund and his/her value of investment increases to 11.2 million Taka (which is 2% of the total asset of the MF at the end of the first year or 560 million Taka). So, the return for the unitholder on his/her investment of 10 million Taka would be 1.2 million Taka or 12%. For simplicity, we assumed no fees or tax in this example.
However, in reality, return on investments for the unitholders will always be return on the Mutual Fund’s portfolio less fees and taxes. And there is no guarantee that Mutual Fund investment portfolio will always generate profit or gain- there can be losses, too.
- What about the other costs? Repurchase/ Redemption/ Transfer?
We do not charge such fees. EDGEBDMF units are bought and sold at NAV per unit unless declared otherwise.
- What documents are required for registration?
Filled-in unitholder’s registration form
Copy of Applicant’s NID/ passport
Copy of Nominee’s NID/ passport
Applicant’s passport size photograph
Nominee’s passport size photograph
1 (endorsed by the applicant on the back-side)
Copy of Applicant’s BO Acknowledgement/ Portfolio Statement
Copy of Applicant’s ETIN Certificate
Copy of Applicant’s blank cheque leaf copy/ Bank Statement
- Can we subscribe without coming to your office?
Yes, the whole process can be completed online. An online form is available in the “Contact Us” section of our website. An interested individual only needs to fill in the form and upload the required documents to start the subscription process.
- Do I need a BO account and a bank account to invest in Mutual Fund?
Yes. Both accounts are mandatory for investing in Mutual Fund
- How can I open a BO Account?
An account can be opened by contacting and obtaining the associated forms from any of the country’s brokerage houses. We can also carry out the process on your behalf if you provide us with the required documents. Brokerage houses charge a maintenance fee per year.
- What are the required documents to open a BO?
Listed below are the documents required by brokerage houses. There might be slight variation across brokerage houses.
- 3 copies of Passport-sized photograph
- Copy of NID/ Passport
- Copy of Bank Statement/ Cheque Leaf
- 2 copies of photograph of nominee (duly attested by A/c holder)
- Copy of NID of nominee (duly attested by A/c holder)
- Is it mandatory to have an E-TIN Certificate?
No. But investors with E-TIN Certificate will get a tax bracket. 10% instead of 15% tax on cash dividend.
- How do I deposit my money in a MF?
We receive money for investing in EDGEBDMF through cheque/ pay order/ demand draft addressed to EDGE Bangladesh Mutual Fund. Investors can directly deposit the fund in the designated bank account or transfer through BEFTN or even just send it to our office and we will take care of the rest.
- What is investor’s buy/sell price?
The buy/sell price is published online on every Thursday and reported in the daily Financial Express on every Sunday. The price mentioned on Thursday will be the effective buy price from Sunday through Wednesday in the following week. Units are not bought or sold on Thursday.
- What is the process for redemption/ surrender or cashing-out investments in the Mutual Fund?
An investor must submit the Unit-Repurchase Form and submit the completed CDBL Transfer Request Form to his/her respective brokerage house. The brokerage house will then contact CDBL and wait for confirmation. Upon receiving confirmation, we will disburse the payment to the redeeming investor through account payee cheque or BEFTN transfer, as per his/her request, within minimum 3 working days.
- What is entry load and exit load?
Entry load refers to an additional fee charged on an investor’s initial investment. Exit load is a fee charged when an investor withdraws his/her investment. EDGE Bangladesh Mutual Fund does not impose any of these charges until and unless declared otherwise.
- Is there any lock-in period after investing?
No. Investors are free to surrender their units for cash anytime, though that does not yield positive investment result.
- How long do I need to wait to receive my money against sale proceed?
Three to Seven working days.
- What is your dividend policy?
EDGE Bangladesh Mutual Fund will declare 70% of annual realized earnings as dividends and also offers investors the opportunity to choose between receiving cash dividends and cumulative investment plan (CIP) to compound investment balance by minimizing transaction costs. The latter allows the fund manager to reinvest the dividend in the prevailing investment opportunities.
- What is CIP?
An investor can opt for the Cumulative Investment Plan (CIP) as an alternative to receiving cash dividends. The dividend proceeds (less tax) will then be used to purchase additional fund units, thereby increasing the total number units owned by the investor. In a nutshell, unitholders subscribing to CIP, receives additional proportionate number of Mutual Fund units instead of cash every time the Mutual Fund declares cash dividend.
- What is a closed period?
The fund units are not traded during the closed period. No buying or selling takes place as this period is used for the preparation and audit of the fund’s financial statements. The dividend distribution process is also initiated during this time.
- How long do I need to wait to receive dividend against my investment?
Dividend warrants will be dispatched within 45 days of dividend declaration.
- What is a SIP?
Systematic Investment Plan (SIP) allows investors to invest a certain pre-determined amount at a regular interval (monthly, quarterly, yearly etc.). A SIP is a planned approach towards investments and helps to inculcate the habit of savings and building wealth for the future by minimizing market timing risk. Investor can start with a very small amount that is minimum BDT 1,000.
- Is SIP available for investing EDGEBDMF?
Yes. We offer SIP for investing in the EDGE Bangladesh Mutual Fund. To invest through SIP, investor needs to make the installment payments on 10th of each month.
- What are the benefits of SIP?
- Develop the habit of disciplined investing
- Make market timing risk irrelevant for unitholders
- Reduces overall level of investment risk by Taka-cost averaging
- Harness the benefit of compounding return over time
- Highly convenient for any kind of investors with automatic from bank account-to-Mutual Fund transfer facilities, instant liquidity, small investment installment size (of BDT 1,000), and great flexibility
- Best tool for achieving long-term financial goals
- How to invest in SIP?
Step 1: Deciding an installment size
Step 2: Selecting the target Mutual Fund(s) given unitholder’s long-term risk-return objective
Step 3: Fill-in registration form with EDGE AMC submitting all the relevant documents (reference to FAQ 11)
Step 4: Issue initial cheque in the name of EDGE Bangladesh Mutual Fund. EDGE AMC also assists unitholders to set-up an auto-debit bank account facility to ease the recurring fund subscription process- for this the unitholder needs to submit the dully filled and signed BEFTN/ Auto Debit/ General Instruction form to his/her respective bank
Step 5: Confirmation on unit issuance will be sent to unitholders will be sent in 3 business days from each payment date and units of EDGE Bangladesh Mutual Fund will be automatically credited to unitholders’ BO account thereafter
Step 6: Unitholders will get weekly investment statement on each Thursday with updated investment balance. Unitholders can retrieve their transaction history in the fund from EDGE AMC anytime in the business hours or through emails
- Is there a minimum investment amount for SIP?
Minimum investment under SIP registration is BDT 1,000.
- Is there a minimum lot size for SIP?
In fact, there is no minimum lot size of units under SIP. Any fraction amount remaining will be converted when it sums up to one unit. While surrendering, if remaining amount does not sum up to 1 unit then the remaining amount will be transferred via BEFTN.
- What are the payment options for SIP?
Payment in respect of the first installment can be made using a cheque/ pay order/ demand draft. Further payments will be made through Direct Debit facility/ Auto-Debit/ BEFTN transfer.
- What happens after SIP maturity?
- Auto- Renewal: Investors can easily renew the SIP after the maturity period and it will be continued until further notice from the investors.
- Surrender: As per investor’s decision, the matured amount will be kept as it is in his/her BO account. It can also be transferred to his/her bank account as per choice. We will personally knock investors to execute his/her order.
- No Auto-renewal and No encashment: Investors can still remain invested after the maturity of SIP if they want. In this case, the matured investment will be count as non-SIP scheme till surrender. Investors themselves take the decision when to surrender the EDGEBDMF units.
- Does the SIP allow partial surrender?
Yes. Investors can surrender EDGEBDMF units partially and continue the SIP till maturity.
- Does SIP allow investments from Joint investors?
Yes. Unitholders can jointly invest through SIP abiding by same procedures.
- Does SIP allow investments from institutional investors?
Yes. Minimum installment for institutional investors is BDT 10,000.
- What happens if the 10th of the month is a weekend or holiday?
The Auto-Debit will take place on the following working day on that week’s purchasing price.
- What is the maximum amount of SIP installment?
Individuals are allowed to invest BDT 1,000,000 per installment under one registration number. There is no such limitations for institutions.
- How to discontinue the SIP?
Investors need to provide an application to the Asset Manager regarding discontinuation of SIP at least 5 working days before the next installment date.
- Will there be any fees or penalties for discontinuing the SIP before maturity?
As of now – no additional fees is charged for discontinuing SIP before maturity.
- What if investor defaults on their on their auto debit payment?
There are no penalties for such defaults. The default of 3 (two) consecutive installments will result in discontinuation of SIP. If the investor needs to continue the SIP again, s/he has to re-enroll into a SIP.
- What if investor wants to top-up his/her installment?
Investors can top-up installment amount; however frequent and big-ticket top-ups are not recommended in a SIP account as doing so can significantly distort the salient features in terms of risk/ return balance of SIP.
- Can the investors change his/ her bank account information before the maturity of the SIP?
Yes. Investor must change the bank details at least 5 working days before the maturity date.
- Can the investor pay a lump sum amount in advance for SIP?
No. We cannot accept any lump sum amount in advance for SIP. Investors are allowed only to make installment payments every month on 10th.
- Can I transfer units to another account?
The Units of the Fund are transferable by way of inheritance/ gift and/ or by specific operation of the law.
- Do I receive any proof of purchase after my investment?
Yes, investors get an Acknowledgement slip authorized by at least one of the signatories of the company. The purchased unit will be credited in your BO account after CDBL transfers those to your broker after that you can see the units in your BO statement.
- For how long do I need to remain invested in the fund?
EDGE Bangladesh Mutual Fund do not have any lock-in period which means an investor can buy and sell anytime he wants.
- Can NAV or buy/sale prices be lower than the Face Value of the units?
Mutual fund’s NAV has a very positive correlation with the market value of assets. Hence if the market value of the asset goes down, chance is high NAV per unit may decrease and fall below the face value. However given the long-term performance outlook of risky asset classes in a growing economy like Bangladesh, such underperformance should not sustain over long-term.
- How much do you charge as an entry or exit fee?
We do not charge any fees for surrendering or redeeming EDGEBDMF units unless and until declared otherwise at a given point of time.
- What is a Unit of a Mutual Fund?
Shares representing the ownership in a mutual fund is generally called a unit. Investors can purchase or redeem units of an open-end fund at the fund’s contemporary NAV per unit.
- How is NAV calculated
NAV= Net Assets – Liabilities
Net Assets= Value of all securities in vault + Value of all securities placed in lien + Cash in hand and at bank + Value of all securities receivables + Receivables of proceeds of sale of investments + Dividend receivables net of tax + Interest/profit receivables deposits net of tax + Issue expenses net of amortization expense as on date + Printing, publication and stationery expenses amortized as on date
Liabilities= Value of all securities payable + Payable against purchase of investments + Payable as brokerage and custodial charges + Payable as Trustee fees + All other payable related to printing, publication and stationery + Accrued deferred expenses with regard to management fee, annual fee, audit fee and safe keeping fee.
NAV per unit= Value of NAV/ No of units outstanding
- How often do you publish NAV?
EDGE AMC publish the NAV weekly as business closes on each last work-day of the week (which is mostly Thursday) on the company’s website, Facebook page, LinkedIn page, The Financial Express. EDGE AMC also sends out an Investment Account Statement that reports details of the investment in the Fund along with some context on market performance.
- Who can invest in MF
Individuals both resident and non-resident, institutions–both local and foreign, mutual funds and collective investment schemes are eligible to subscribe the Units of the Fund.
- How do I know whether my money has been invested or not?
Every Unit holder is entitled to receive annual report along with the yearly and half yearly statements of accounts as and when published on the asset management company’s website (www.EDGEAMC.com). Through the published report portfolio allocation can be known.