Nepal’s First Largest Ever Mutual Fund Issue of “NIBL Growth Fund”; Exclusive Interview with Deputy General Manager Sachindra Dhungana

Nepal’s first largest ever mutual fund issue of “NIBL Growth Fund”

Exclusive Interview with Deputy General Manager Sachindra Dhungana

NIBL Ace Capital Limited have already published an offer letter to issue Nepal’s largest ever mutual fund scheme named NIBL Growth Fund. NIBL Growth Fund is a mutual fund scheme worth Rs 1.6 Arba. Considering that each unit of mutual fund has a face value of Rs. 10, sixteen crore units will be issued, opening on 7^th and closing on 12^th Poush, 2079, respectively. NIBL Growth Fund is a closed-end mutual fund scheme with a maturity period of 10 years. Out of the total 16 crore units, 16 lakh units i.e. 1% of scheme size has been reserved for the Fund manager, NIBL Ace Capital. Similarly, 3.04 crore units i.e. 19% of the scheme size have been reserved for the Fund Sponsor, Nepal Investment Bank. And the remaining 12.80 crore units i.e. 80% of the scheme size will be issued for the general public.

Investors can apply for a minimum of 100 units and a maximum of 1.60 crores units from 7^th Poush till 12^th Poush, 2079; if not subscribed by 12^th Poush, issue can be extended till 21^st Poush, 2079.

How was the concept of NIBL Growth Fund created?

As you all are aware, "NIBL Samriddhi Fund-1" was the first close-ended scheme of NIBL Mutual Fund with a maturity period of 7 years which matured a year back on 22^nd Poush 2078. The scheme was successful to provide optimum returns to investors over the years with consistent dividend payout that amounted to an average annual return of 17.99% with a total dividend payout of 98.50%. Currently, we manage altogether three mutual fund schemes. Two closed-end funds i.e., NIBL Pragati Fund (NIBLPF) and NIBL Samriddhi Fund-2 (NIBSF2), and one open-end fund NIBL Sahabhagita Fund (NIBLSF) in the market.

With more than 8 years of practical experience of managing mutual fund schemes, we are extremely delighted to uphold the legacy of our mutual fund schemes henceforth and provide attractive returns to our investors who believed in our earlier schemes by introducing our latest venture as NIBL Growth Fund.

What are the general features of NIBL Growth Fund and expected dividend payout?

NIBL Growth Fund (NIBLGF) is the fifth mutual fund scheme under NIBL Mutual Fund managed by NIBL Ace Capital Limited. It is a close ended fund with the corpus fund of Rs. 1.6 billion and the maturity period of 10 years. The name, NIBL Growth Fund, itself suggests that we are targeting to invest in growth oriented companies with less risk and higher return. For our unitholders, NIBL Growth Fund (NIBLGF) aims to provide moderate steady return over the maturity period by mitigating market risks and projects to deliver 20.25% of effective annual returns in ten years and total dividend payout of 114%.

Is it the right time to invest in NIBL Growth Fund or not?

As you are well aware, NIBL Growth Fund is more of a blended type of mutual fund scheme where maximum 65% of investment is done into the equity market and remaining in FD, bonds and debentures. Our market witnessed the all-time intraday high of 3227.11 on August 19, 2021 with a staggering volume of 21.31 billion. Since then, market went into a complete bear phase with the index currently standing around 1850’s level, that rounds up to more than 42% from the all-time high level. We believe, the market has already retraced to a very low point where the risks seem comparatively less as to the time when market was hovering around its peak. Thus, we believe that moderate risk of the current market suggests that it is the optimum time to invest in NIBL Growth Fund.

Kindly walk us through the performance of the existing mutual funds managed by NIBL Ace?

Our first mutual fund, “NIBL Samriddhi Fund-1” has been able to provide attractive returns to unit holders with the total dividend yield of 98.50%.  “NIBL Pragati Fund”, being a whole equity-based scheme, started its investment when market was in the distribution phase of previous bull cycle and unable to provide any dividend till 2076/77. But we were in a comfortable position to give optimum return to unitholders from the Fiscal Year 2077/78 and our total dividend payout amounts to 54.20%. Our Nepal’s first open ended scheme, “NIBL Sahabhagita Fund” has also successfully provided better returns to its unit holders rounding up to a total dividend yield of 65.45%. Likewise, our recently launched NIBL Samriddhi Fund -2 scheme is in its second year of operation which just started on May 2021.

It would be much clear if you introduce us to your team that makes the investment decisions. How strong is your supervisor team?

Investment planning and investing decisions is the crucial part in managing mutual fund schemes. We have the Fund Sponsor, Nepal Investment Bank Ltd and Fund Manager, NIBL Ace Capital at the very top to make investment decisions. Also, we have separate Investment and Risk Management Committee comprising of board members and management team to guide and supervise investment decisions. In addition, we also have a dedicated Research and Development team to provide updated Fundamental and Technical Analysis Report of the stocks, sectors, and overall market with macro-economic analysis on daily basis. Scheme Manager and Investment Head create a periodic investment plan based on the reports and market analysis provided by the research team, which is then presented to the Investment and Risk Management Committee for approval and any necessary direction in carrying out the proposed investment plan. The entire investment management team is digitally connected to act quickly on the suggested plan due to the time component involved in its execution. And regarding the supervisor team, we have very experienced and renowned personalities to supervise the NIBL Mutual Fund Schemes.

What are your stock selection and investment strategies for NIBL Growth Fund?

General asset allocation of the proposed Scheme's portfolio will be a maximum of 65% in Equity and Equity related instruments and remaining in FD, bonds and debentures, alternative investment instruments and cash. By assessing the macroeconomic situation and the risk & return factors, we will make the investment. Both short-term and long-term investing strategies will be adopted by us. Equity investments shall be categorized into trading, dividend yield, and value appreciation categories. Our sole focus in on providing optimum returns to our unitholders.

This issue will have a maturity period of 10 years. How does the fund manager see the scenario of Nepal's capital market and its future prospects when viewed from an investment perspective?

Nepalese capital market is a growing market and its future holds promising aspects. We are yet to introduce concepts such as derivatives and swaps. At present, market comprises of investors mainly driven by emotion and herd mentality rather than those with an educated investment approach. I can only see the market being more educated and formalized as days go by. We created this blended fund so as to hedge the market by going into more secured form of instruments in FD and generally stable stocks. When a scenario comes, and it will come sooner than later, new forms of instruments will be introduced and we will be in a better position to observe the response towards the said instruments.

As you know, we witnessed an all-time high of 3227.11 in the NEPSE index around 1.5 years ago with a staggering volume of 21.31 Billion. More and more people are actively participating towards the betterment of Nepalese Capital Market. The rise in the number of listed companies in NEPSE, turnover in NEPSE, increment in the number of IPOs and IPO applicants show immense participation of stakeholders in the market shall grow further in the days to come.

Why Mutual Fund investment is better than shares? Who should invest in the mutual fund and why?

Mutual Funds help you achieve your financial goals over a period of time. Does that mean you should consider investing in Mutual Funds only when you have a specific goal in mind and not otherwise? No! even in the absence of financial goals, they are a good choice for anyone wishing to grow his/her savings or remain prepared at all times should a goal emerge in the future. For example, if you are likely to invest in the secondary market you should at least have investment more than Rs. 20,000 for the 100 units or if you go for the portfolio management service you should at least have the lump sum money of Rs. 300,000 as a minimum investment. Thus, as for the investment in mutual fund you should only have a minimum of Rs. 1,000 which will provide you the blend of stock from (growth stock to fairly value stock) with minimal risk having the compounding return for the longer time horizon. Investing in stocks can be beneficial, if you have the requisite knowledge. However, if you don't, mutual funds are a better alternative. As said, they invest in a range of stocks with a professional fund manager at its helm.

What is the current status of the mutual fund and merchant banking scenario in Nepal?

Mutual funds can be broadly divided into two types i.e. Open Ended Mutual Fund and Close-Ended Mutual Fund. With the launch of the NCM mutual fund in 1993 A.D. (2050 B.S.), the mutual fund concept was first introduced in Nepal and became well-known after Mutual Fund Regulation, 2067. Till date, there are 30 Close Ended mutual funds trading in NEPSE, 6 Open Ended mutual funds and 6 of the mutual funds have already expired. Total corpus fund of all the existing close ended mutual funds stands at Rs. 32.44 billion. If we look into the data, currently existing Mutual funds that have completed more than 5 years and those Mutual funds that have already matured in Nepal have provided an average annual return of 15.76% including both capital gain yield and dividend yield.

Likewise, Merchant banking business has evolved immensely over past few years and has seen changes in every domain of its work. Major changes can be observed in RTA/RTS, issue management and DP related services due to digitization in this field. Compulsory dematerialization of public issues in 2018 changed and prioritized DP business. Introduction of dematerialization also changed the nature of share registrar business and Merchant bankers now act as registrar and transfer agents(RTA) along with registrar to shares(RTS). Similarly, with the introduction of C-ASBA in 2018, issue management business has also seen major changes. Previously, companies visited merchant bankers for issuance of securities whereas now merchant bankers approach various companies to assist them in issuance of securities to general public. NIBL ace capital has also adapted as per the change in merchant banking business.