The stock market regulator will look into the business activities of asset management companies (SGAs) that do not manage funds or are not in business after licensing.
The Bangladesh Securities and Exchange Commission (BSEC) recently identified 10 of these inactive asset management companies.
But companies benefit from the quota facility in Initial Public Offerings (IPOs) and Qualified Investor Offers (QIOs) in the capital market as Qualified Investors.
These are Alif Asset Management Company, Invest Asia Capital Asset Management, BDV Asset Management Company, Meghna Asset Management, Bloominance Asset Management Company, Blue-Wealth Assets, Belt and Road Asset Management Company, Maslin Capital, BMSL Asset Management Company and MBL Asset Gestion Limitée.
Market insiders have said that the mutual fund industry cannot build confidence among investors for not performing well over the past decade.
Therefore, the liquidity crunch, lack of sufficient skilled workforce and leadership, lack of proper disclosure and goodwill are also responsible for this situation, insiders added.
As a result, some companies have failed to secure funds and face challenges.
“We will mainly suspend the IPO quota of asset management companies that have obtained licenses but are not in operation,” said the president of the BSEC. Professor Shibli Rubayat-Ul-Islam.
“We can also revoke the licenses of these companies after an investigation.”
Waqar Ahmad Choudhury, vice president of the Association of Asset Management Companies and Mutual Funds, said there was negative propaganda in the mutual fund industry.
“Many institutions are not interested in entering the sector. As a result, newcomers face challenges in creating funds and building confidence. Although the regulator tries to minimize complexity to improve this sector,” he said he added.
Emran Hasan, CEO of Shanta Asset Management, said there was not enough skilled workforce and leadership to run so many asset management companies. Additionally, many sponsors have acquired licenses without any serious planning and vision.
In addition, most of our retail investors prefer to invest directly in the stock market rather than through professional fund managers or mutual funds, he added.
“The country’s current mutual fund industry assets under management are still too small for more than 50 asset management companies,” said Emran Hasan.
“However, I think this sector will see very rapid growth over the next five years.”
Recently, the commission decided to examine the business activities of Assurance Asset Management Ltd after finding anomalies in the reports submitted to the regulator on behalf of the company.
According to Investopedia, an asset management company invests clients’ mutual funds in a variety of securities and assets.
AMCs vary in size and operations, from personal fund managers to giant investment firms.
AMC managers are remunerated through commissions, typically a percentage of a client’s assets under management. Most AMCs are held to a fiduciary standard.
BSEC has provided 51 licenses for asset management companies until August 17, 2021.
In addition, the commission also provided 21 fund managers up to June 7, 2021.
According to IDLC Asset Management Income Fund 2021, a mutual fund was first introduced by the Investment Corporation of Bangladesh, a public sector financial institution, in 1980.
Later, private companies began to enter the industry in 2000.
There are only 37 closed-end mutual funds and 64 open-end mutual funds in Bangladesh and the total assets under management (AUM) is around Tk 13,520 crore until March 2021, while in India AUM is around Tk 35 38,150 crore in January. 2021.