An official of the asset manager told The Business Standard that the target size of the upcoming fund would be Tk150 crore.
United Commercial Bank has decided to be the sponsor of an upcoming closed-end mutual fund to be managed by Capitec Asset Management.
As the sponsor of a growth fund to be listed publicly, the private sector lender will invest Tk50 crore, UCB announced in a regulatory disclosure on Tuesday, adding that its board of directors has already approved the decision.
A growth mutual fund focuses on investing in companies with high potential for faster growth, and capital gain-chasing investors tend to prefer such mutual funds over income funds, which invest in high-income generating stocks or bonds.
An official of the asset manager told The Business Standard that the target size of the upcoming fund would be Tk150 crore.
The fund will apply for regulatory flexibility to enable the asset manager to better switch between suitable asset classes – stocks and bonds – to maximise returns for investors, added the official.
For instance, when fixed-income securities like corporate or treasury bonds offer lucrative yields, stocks as an asset class usually face selling pressure. Conversely, when interest rates go down, smart investors tend to switch to stocks over fixed-income assets.
Stiff regulations requiring a minimum exposure to stocks often force mutual funds to absorb capital erosion when the stock market goes through a bearish cycle.
Capitec currently manages four mutual funds – three open-ended mutual funds and one closed-ended fund.
Source: The Business Standard