In line with the international practice, the mutual fund managers and sponsors in the country will now be required to be rated for their credit worthiness by a rating agency.
Capital market regulator — Securities Board of Nepal (Sebon) — has decided to direct the mutual fund managers and sponsors to be rated by credit rating agency before they can launch mutual fund schemes.
“Sebon has made credit rating mandatory for the mutual fund managers and sponsors,” informed spokesperson for the capital market regulator, Niraj Giri. At present, commercial banks are working as mutual fund sponsors, while the banks’ merchant banking subsidiaries have been licensed to work as fund managers.
“The decision was taken last week, but we have yet to issue directives to the issue managers,” he added.Since the mutual funds are handling almost half a billion rupees of the public, the credit rating will help ensure that the fund managers and sponsors backing them are solvent and credible enough.
”Although the fund as such cannot be rated, we can at least rate the companies that will control and invest the funds pooled in from the public,” pointed out Giri, adding that rating the fund managers and sponsors is also an international practice.
Though Sebon has decided to make credit rating compulsory, absence of such provision in the regulations might hinder its implementation. Both Credit Rating Regulation 2068 and Mutual Fund Regulation 2067 lack the provision of getting the mutual funds managers or sponsors rated.
According to Credit Rating Regulation 2068, only the companies that are launching public offering, bonds, debentures or right shares worth more than Rs 30 million or issuing shares at premium are mandated to get a rating. There is only one credit rating agency operational here, namely Icra Nepal.
Mutual funds invest pooled cash of small investors and issue units to the investors in accordance with amount of money invested by them. This instrument is considered to be the best for the rookie investors or those with small investment fund.
There are two mutual funds worth Rs 1.25 billion listed at Nepal Stock Exchange (Nepse). Siddhartha Growth Investment Fund I — managed by Siddhartha Capital — worth Rs 500 million was issued in November 2012. Nabil Invest’s mutual fund scheme — Nabil Balanced Fund I worth Rs 750 million — was launched in March 2013.
Rating of mutual funds might help fresh investors gain a better insight into fund manager’s capability.However, the decision has not gone down well with the fund managers.
“How can Sebon impose a rule that is not mandated by the law?” questioned a mutual fund managing firm’s CEO, who is waiting for Sebon to approve the company’s scheme. Three schemes worth Rs 1.8 billion are already waiting for the regulator’s approval. Siddhartha Capital, NMB Capital and Laxmi Capital are waiting for the regulator’s approval of their proposed scheme since more than six months.
“The rating doesn’t make sense since the performance of these funds depends on the performance of shares and bonds in its portfolio,” the issue manager argued.
source: the himalayan times,20 jan 2014
LINK
Capital market regulator — Securities Board of Nepal (Sebon) — has decided to direct the mutual fund managers and sponsors to be rated by credit rating agency before they can launch mutual fund schemes.
“Sebon has made credit rating mandatory for the mutual fund managers and sponsors,” informed spokesperson for the capital market regulator, Niraj Giri. At present, commercial banks are working as mutual fund sponsors, while the banks’ merchant banking subsidiaries have been licensed to work as fund managers.
“The decision was taken last week, but we have yet to issue directives to the issue managers,” he added.Since the mutual funds are handling almost half a billion rupees of the public, the credit rating will help ensure that the fund managers and sponsors backing them are solvent and credible enough.
”Although the fund as such cannot be rated, we can at least rate the companies that will control and invest the funds pooled in from the public,” pointed out Giri, adding that rating the fund managers and sponsors is also an international practice.
Though Sebon has decided to make credit rating compulsory, absence of such provision in the regulations might hinder its implementation. Both Credit Rating Regulation 2068 and Mutual Fund Regulation 2067 lack the provision of getting the mutual funds managers or sponsors rated.
According to Credit Rating Regulation 2068, only the companies that are launching public offering, bonds, debentures or right shares worth more than Rs 30 million or issuing shares at premium are mandated to get a rating. There is only one credit rating agency operational here, namely Icra Nepal.
Mutual funds invest pooled cash of small investors and issue units to the investors in accordance with amount of money invested by them. This instrument is considered to be the best for the rookie investors or those with small investment fund.
There are two mutual funds worth Rs 1.25 billion listed at Nepal Stock Exchange (Nepse). Siddhartha Growth Investment Fund I — managed by Siddhartha Capital — worth Rs 500 million was issued in November 2012. Nabil Invest’s mutual fund scheme — Nabil Balanced Fund I worth Rs 750 million — was launched in March 2013.
Rating of mutual funds might help fresh investors gain a better insight into fund manager’s capability.However, the decision has not gone down well with the fund managers.
“How can Sebon impose a rule that is not mandated by the law?” questioned a mutual fund managing firm’s CEO, who is waiting for Sebon to approve the company’s scheme. Three schemes worth Rs 1.8 billion are already waiting for the regulator’s approval. Siddhartha Capital, NMB Capital and Laxmi Capital are waiting for the regulator’s approval of their proposed scheme since more than six months.
“The rating doesn’t make sense since the performance of these funds depends on the performance of shares and bonds in its portfolio,” the issue manager argued.
source: the himalayan times,20 jan 2014
LINK
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