Public Issue of "Nabil Balanced Fund III" Opening From Today; Exclusive Interview With CEO

Nabil Investment Banking Limited has published an offer letter to issue the "Nabil Balanced Fund III." The public issue will open on 25th Bhadra and conclude on 29th Bhadra, 2078. If the issue isn't fully subscribed by the early closing date, the deadline can be extended till Ashwin 08.

Nabil Balanced Fund III is a close-ended fund, meaning it will be traded in NEPSE. The fund has a maturity period of 10 years. The fund has 10 crore units at a par value of Rs 10 per unit. 14% of the fund is allocated to fund promoter Nabil Bank and 1% to fund manager Nabil Invest. The remaining 8.5 crores will be open for the public issue.

Interested investors can apply for a minimum of 100 units to a maximum of 1 crore units.

Offer Letter

To inform potential investors about the fund and the fund manager, ShareSansar interviewed Mr. Manish Narayan Joshi, CEO at Nabil Invest.

1) What is the story behind this fund issue? Why did Nabil Invest decide to issue a mutual fund at this point in time?

Mutual fund (MF) is unlike other instruments in the capital market, for MF has a long-term horizon designed to provide long-term value to investors.

The NBF3 is the 4th close-ended scheme from Nabil Invest and is a result of past experiences of 3 similar funds. All of our previous schemes have not only been market beater but have stood amongst the best of MF by NAV and dividend payout. This one will go a step further, if not at the same level because the fund supervisors are the same as our past schemes and they have become more astute about the market and its intricacies.

Moreover, with a 10 yr. horizon from start to finish, theoretically a mutual fund should be able to resist downward trends in the market and generate value for investors. However, we felt technically this was the right time to launch the scheme given the bullish trend overall and acquire traction right from the start to provide positivity for the fund supervisors.

2) How will the fund pick investment opportunities? Will it incline towards value investing, dividend investing, speculation, or a mix of all?

NBF3 is the 3^rd of its kind after NBF1 and NBF2 within the broad category of Balanced fund scheme. Our objective is to generate optimum returns minimizing the market risk by investing in a mix of securities comprising of equity and fixed income instruments as allowed by prevailing rules/regulations on mutual funds.

3) The investment strategy of any fund is the mirror of its fund managers. Kindly give us a brief look into your team, their past experience, credibility, and what motivates the team to succeed and prove their metal in this new fund.

Our team is guided by veteran supervisors from diverse fields ranging from the legal profession, academicians, research experts, former decision-makers from SEBON, Beema Samiti, and Auditor General. These are mostly the same people who guided the NEF, NBF1, and NBF2.

Also, our internal team is comprised of staff with a background in Business Administration, Economics, Chartered Accountancy with experience of 5-15 yrs. in the capital market.

We have learned that the market has behaved unpredictably especially with the COVID situation and there has been a rising interest in the stock market in recent years. All of these have brought about a new challenge for us to generate value for investors even in difficult times.

4) Is the fund manager content with the performance of its previous fund issues? Is there anything this fund will do differently from those funds, given the new learning that the fund manager has acquired? 

We feel we have done exceptionally well yet we cannot be complacent. The market is changing and evolving all the time, for this reason, we have established a dedicated research unit to provide a technical and fundamental analysis of the market indices.

Stock buying and selling are based on informed decision making taking into consideration various investment theories and their practical application.

5) This issue will have a maturity period of 10 years. How does the fund manager see the scenario of Nepal's capital market in the next 10 years when viewed from an investment perspective? How will the fund move forward and tackle uncertainties?

The Nepalese capital market is a growing market and much can be anticipated about the future. We are yet to introduce concepts such as derivatives and swaps. Further, the market comprises investors driven by emotion and herd mentality rather than following an educated investment approach. I can only see the market being more educated and formalized as days go by.

For this reason, we have made this a balanced fund so that we can always hedge the market by going into a more secured form of instruments in FD and generally stable stocks. If a scenario comes, and it will come sooner or later, when new forms of instruments are introduced, we will be in a better position to observe the response towards those instruments.

6) In our conversation with fund managers from various investment subsidiaries, we repeatedly get the viewpoint that mutual funds have historically performed like index funds (exceptions considered). Does the fund manager think mutual funds (as a sector) can provide market-beating returns? Along the same line, will the upcoming fund outperform the index in both the bull market and the bear market? Or should investors only expect their investment to beat inflation and add a hedge to their overall portfolio? 

The performance of mutual funds depends on the capacity and experience of the fund manager. Nabil Invest as a fund manager of mutual funds has historically provided better returns for their investors.

It needs to be understood that investing in mutual funds is considered a secured means of investment among all the other instruments. MF provides a good platform for new entrants and risk-averse investors to get a grip of the secondary market.

Returns from MF as a sector are generally way better than from FD’s and provides the option for holders to liquidate at their liking.

Another point I would like to stress is that our market is not well diversified. Because of the limited sectors and limited scrips in these sectors, there isn’t much we can play around with in terms of sectoral diversity. However, with the introduction of Book Building, we are positive that the sectoral diversification will increase and the market will provide a true reflection of the overall economy of the country.

In addition, this year has been groundbreaking in terms of the secondary market as we have seen an all-time high. With the groundbreaking decisions in the primary market as well we are hopeful that real sectors will take the market to a new high. This is a good time to be in this space and Mutual Fund from an experienced Fund Manager with healthy track records can only strengthen the trust of the investors in the Market.

7) Does the fund manager have a yearly projection of the upcoming fund's NAV and Dividend?

An investor with an investment of Rs. 10 on their units is projected to receive a redemption price of Rs. 16.12 per unit at maturity.

8) Concluding Question: A significant majority of the investors' community takes information related to Nepal's capital market first-hand from Sharesansar. We are elated to give the fund manager a platform to spread their word out there. Having said that, why should the reader go and buy the units of the fund right now?

Thank you for the platform. Sharesansar and Nabil Invest, both started at a similar time. We have seen Sharesansar grow from humble beginnings to where it is now. You can now imagine how Nabil Invest has also evolved during this period.  Like I mentioned we are one of the early entrants in the Mutual Fund space and NBF 1 did exceptionally well. From these all experiences, we can only learn and be better. So, NBF3 was brought about by carefully assessing the shortcomings and success of investment strategies employed in the previous schemes.

Data-driven analysis of the market will provide informed decision-making capabilities to our fund managers.  Guided by veteran supervisors from diverse fields, if our previous schemes can be taken as benchmarks surely this one is designed to exceed it. Being one of the early entrants in the Mutual Fund space, the institutional experience of Nabil Invest as a Fund Manager has garnered will only benefit the scheme we will be introducing. These benefits will ultimately be passed on to our unitholders.