The Return of Mutual Funds Beats Inflation. Why Aren’t You Investing in Mutual Funds?
Sun, Apr 25, 2021 10:59 AM on Mutual Fund, Stock Market, Exclusive,
Investment in mutual funds has been an attractive choice internationally, since the introduction of the investment vehicle in response to the financial crisis of 1772-1773 from the Dutch republic. The attraction in mutual funds is mainly because of minimal seed funds required in the beginning. The funds are managed by the professionals and the investors are free from the hassles of security selection and analysis.
In Nepal, the concept of mutual fund began with the introduction of NCM mutual fund in 1993 A.D. (2050 B.S.) and gained its popularity after the implementation of Mutual Fund Regulation, 2067. To date, there are 19 mutual funds trading in NEPSE, 5 matured and 2 are Open-ended mutual funds namely NIBL Sahabhagita Fund and NIC Asia Dynamic Debt Fund. Moreover, there Sunrise Bluechip Fund a new closed-end mutual fund that has issued NFO to the general public but is yet to be listed in NEPSE. NIBL Sahabhagita Fund is the first open-ended mutual fund of Nepal established after the implementation of Mutual Fund Regulation, 2067.
Mutual funds have provided attractive returns to Nepalese investors as well.
|
S.no |
Symbol |
Name |
Total Dividend Yield |
Capital Gain Yield |
Total Yield |
Annual return |
Remarks |
|---|---|---|---|---|---|---|---|
|
1 |
NIBSF1 |
NIBL Samriddhi Fund 1 |
63.50% |
35.40% |
98.90% |
15.76% |
Faced a complete bear and bull cycle |
|
2 |
GIMES1 |
Global IME Samunnat Scheme 1 |
4.00% |
63.50% |
67.50% |
13.33% |
Faced a long bear cycle |
|
3 |
SAEF |
Sanima Equity Fund |
17.00% |
44.00% |
61.00% |
18.45% |
Faced a long bear cycle |
|
4 |
NICGF |
NIC Asia Growth Fund |
22.00% |
25.00% |
47.00% |
15.18% |
Faced a long bear cycle |
|
5 |
SEF |
Siddhartha Equity Fund |
18.50% |
22.50% |
41.00% |
11.93% |
Faced a long bear cycle |
|
6 |
SFMF |
Sunrise First Mutual Fund |
7.00% |
30.40% |
37.40% |
25.85% |
Introduced in recent bull market |
|
7 |
NMBHF1 |
NMB Hybrid Fund L- 1 |
18.00% |
16.00% |
34.00% |
7.59% |
Faced a long bear cycle |
|
8 |
NEF |
Nabil Equity Fund |
6.00% |
25.10% |
31.10% |
6.99% |
Faced a long bear cycle |
|
9 |
NMB50 |
NMB 50 |
5.00% |
25.70% |
30.70% |
18.83% |
Introduced in recent bull market |
|
10 |
SIGS2 |
Siddhartha Investment Growth Scheme-2 |
5.00% |
24.90% |
29.90% |
18.28% |
Introduced in recent bull market |
|
11 |
CMF1 |
Citizens Mutual Fund-1 |
22.00% |
7.90% |
29.90% |
9.58% |
Faced a long bear cycle |
|
12 |
NIBLPF |
NIBL Pragati Fund |
0.00% |
26.00% |
26.00% |
6.10% |
Faced a long bear cycle |
|
13 |
NICBF |
NIC ASIA Balanced Fund |
8.00% |
17.50% |
25.50% |
15.62% |
Introduced in recent bull market |
|
14 |
NBF2 |
Nabil Balanced Fund - 2 |
9.00% |
16.30% |
25.30% |
13.46% |
Introduced in recent bull market |
|
15 |
CMF2 |
Citizens Mutual Fund - 2 |
10.00% |
13.40% |
23.40% |
13.18% |
Introduced in recent bull market |
|
16 |
LEMF |
Laxmi Equity Fund |
4.25% |
12.40% |
16.65% |
4.33% |
Faced a long bear cycle |
|
|
Average |
|
|
|
|
13.40% |
|
Note: New funds Laxmi Unnati Kosh, Sanima Large Cap Fund, and Kumari Equity Fund are excluded here to derive a more realistic picture.
Note: Return Calculated as of 15th April 2021
The active mutual funds in Nepal have provided an average annual return of 13.40% including both capital gain yield and dividend yield. Among the 16 mutual funds that are currently trading in NEPSE, a total of eight mutual funds have provided more than the average annual return to their unitholders. These funds are NIBL Sambriddhi Fund-1, Sanima Equity Fund, NIC Asia Growth Fund, Sunrise First Mutual Fund, NMB 50, Siddhartha Investment Growth Scheme-2, NIC Asia Balanced Fund, and Nabil balanced Fund-2.
NIBL Sambriddhi Fund -1 is the only fund that has faced a complete bear and bull cycle and is still able to provide an above-average annual return of 15.76%. Moreover, Sanima Equity Fund and NICA growth Fund are the funds that have had faced a bear market and have provided more than the average annual return.
|
S.no |
Symbol |
Name |
Total Dividend Yield |
Capital Gain Yield |
Total Yield |
Annual return |
|---|---|---|---|---|---|---|
|
1 |
SIGS1 |
Siddhartha Investment Growth Scheme-1 |
124.5% |
118% |
242% |
48% |
|
2 |
NBF1 |
Nabil Balanced Fund-1 |
100% |
75% |
175% |
35% |
|
3 |
NMBSF1 |
NMB Sulav Investment Fund-1 |
77.11% |
7% |
84% |
17% |
|
4 |
SEOS |
Siddhartha Equity Oriented Scheme |
53% |
15% |
68% |
14% |
|
5 |
LVF1 |
Laxmi Value Fund-1 |
65% |
0% |
65% |
13% |
|
|
Average |
84% |
43% |
127% |
25% |
|
A total of five close-ended funds have matured to date and these funds have provided an attractive average annual return of 25% to its unitholders. Siddhartha Investment Growth Scheme-1 and Nabil balanced Fund -1 were the funds that provided the highest annual average return. The Average total yield of these funds is more than 100%.
|
Year |
Inflation |
FD rates |
|---|---|---|
|
2076/77 |
6.2 |
6.1% |
|
2075/76 |
4.6 |
9.2% |
|
2074/75 |
4.2 |
10.2% |
|
2073/74 |
4.5 |
10.1% |
|
2072/73 |
9.9 |
9.7% |
|
Average |
5.88 |
9.1% |
Source: https://www.nrb.org.np/
The average annual inflation of the past five years is 5.88% and an average annual return in the FD rates provided by commercial banks in past five years is 9.1% and the average annual return from the mutual funds traded in NEPSE is 13.40%. This data justifies that investment in mutual funds beats average annual inflation and fixed deposit rates. Moreover, being professionally managed the fund supervisors take calculated risks backed by appropriate research while investing the fund pooled from the investors. Thus, it won't be wrong to say that investment in mutual funds is an attractive choice for investors and is gaining popularity with the passage of time.
* Mutual funds are subject to market risk.
