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MTB’s investment recovery plan threatens unit fund under Alliance Capital

The sponsor of an open-end mutual fund managed by Alliance Capital is seeking to get its money back to avoid risk after media reports brought forth embezzlement of Tk 450 million by the asset manager.

Mutual Trust Bank (MTB) Limited, the sponsor of MTB Unit Fund, wrote to the trustee, Bangladesh General Insurance Company (BGIC) last week to liquidate its investment of Tk 200 million.

The bank has placed the demand as per the rules tied to mutual funds, said Mohammad Nazmul Hossain, group chief financial officer of MTB. The securities regulator has also been communicated with in this regard.

“Our bank wants to keep the investment risk-free,” added Mr Hossain.

MTB Unit fund was floated in 2012 with an initial size of Tk 1 billion. Mutual Trust Bank injected Tk 200 million into that.

An inquiry committee of the Bangladesh Securities and Exchange Commission (BSEC) recently discovered that the managing director of Alliance Capital Asset Management had illegally transferred Tk450 million from two funds under its management to its own bank accounts.

The securities regulator then requested law enforcers to ensure that Alliance Capital’s MD Kh. Asadul Islam does not leave the country.

The other unit fund under the management of Alliance Capital is Alliance Shandhani Life Unit Fund.

What happens with MTB Unit Fund?

In absence of the sponsor, BGIC’s Managing Director Ahmed Saifuddin Chowdhury said, there would be no existence of MTB Unit Fund. “The whole fund will have to be liquidated in that case.”

The sponsor can also change the asset manager, going with the regulation.

MD of Alliance Capital Kh. Asadul Islam, however, differed with the BGIC chief, saying the sponsor may keep a portion of its investment in the unit fund.

“The sponsor may not withdraw the entire amount if we declare dividend at the trustee meeting,” Mr. Islam said.

According to a weekly review of IDLC Asset management, assets of MTB Unit Fund stood at Tk 902 million as of April 11. The net asset value (NAV) was Tk 10.92 per unit.

The value of assets managed under the portfolio of Alliance Shandhani Life Unit Fund was Tk 274 million as of April 11.

About Tk 450 million was transferred into the bank accounts of the asset management company between July 2021 and December 2022.

The chief of Alliance Capital claimed that the money had been put into non-listed securities.

MD of the trustee, Saifuddin Chowdhury said they were yet to hold the trustee meeting as the asset management company (AMC) had not submitted the audit report.

Asked about the trustee’s failure to prevent the fund misappropriation, he said they had informed the regulator on several occasions of the depleting funds.

Expanding stock market exposure

After the liquidation of its investment, Mutual Trust Bank would divert the fund to the stock market, said Mr Hossain.

“Our bank needs fund to increase its exposure to the stock market. That’s why MTB will liquidate some investments, including the one made in MTB Unit Fund,” said the group chief financial officer of the bank.

The bank will inject money into the stock market “through our own investment channels”, he added.

Banks are allowed to invest in listed securities up to 25 per cent of their equity on a solo basis and 50 per cent on a consolidated basis, according to the Bank Companies Act.

MTB Officials said the investment made as the sponsor in the unit fund remains out of its exposure to stocks. That is another reason why the bank is trying to recover the money from MTB Unit Fund and re-invest it in the capital market, they said.

MTB’s exposure to the stock market was 8.66 per cent on solo basis and 35.35 per cent on consolidated basis until the end of February 28.

Source: The Business Standard

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