Mutual Fund and Capital Market

In 1980, the Investment Corporation of Bangladesh (ICB) became the pioneer in launching mutual funds in the capital market in the country. It was a milestone step for investors in our capital market. The then first private organisation, AIMS, evolved its professional mechanism in 1999 for organising mutual funds in Bangladesh. Mutual funds grew slowly over the period of time and had only been close-ended since beginning of its operation in the capital market. In 2010, also the first-ever open-end mutual fund was floated in the capital market by the Prime Finance Asset Management Company and after that, various mutual funds came to the market and mainly operated under the BSEC (Mutual Fund) Rules-2001, Trust Act, 1882 and Registration Act, 1908. Mutual funds pool money of both individual and institutional investors allowing the funds to achieve the economies of scale by reducing costs and increasing investment returns, divisibility and diversification, prudent management for stock picking and timing, reinvestment of dividends, interest and capital gains, tax efficiency and flexibility of trading system with a view to fulfilling the objectives of diversifying the risks and to earn maximum returns.

Definition of mutual funds: A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and is invested typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals). The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objectives. A fund registered with the Bangladesh Securities and Exchange Commission (BSEC) must distribute nearly all of its net income and net realised gains from the sale of securities (if any) to its investors at least annually.

Mutual funds may be of different types from their investment objectives,