Prime Finance First Mutual Fund: A tale of loss and price surge
An investment of Tk 33 crore in shares of 36 listed companies resulted in a loss of Tk 16 crore. Additionally, an investment of Tk 1.92 crore in eight mutual funds incurred a loss of Tk 81 lakh. Investment in a single bond also resulted in losses. Overall, Prime Finance First Mutual Fund experienced a loss of Tk 16.94 crore after investing Tk 35.99 crore in the stock market.
Despite poor performance in share trading, this mutual fund has become a money-making machine for certain investors. The unit price of the fund has skyrocketed recently, tripling in eight months without any warning from the Dhaka Stock Exchange (DSE) about such an abnormal price increase.
Market stakeholders and the asset management company responsible for the fund find the price increase unusual. The capital market regulatory body has stated that if any irregularities are found behind the price hike, action will be taken according to the rules.
Most listed mutual funds are in poor condition, with some selling for as low as Tk 3-4. It is unusual for a mutual fund to triple in value under such circumstances.
In this situation, the price increase cannot be considered normal and may be driven by a special group. A review of the data shows that on November 22, the price of each unit of Prime Finance First Mutual Fund was Tk 14.40. Since then, the price has gradually risen to Tk 46.80, representing an increase of Tk 32.40 or 255 per cent.
To put it in perspective, if an investor had invested Tk 10 lakh in Prime Finance First Mutual Fund on November 22, the market value of his share would now be Tk 32.50 lakh. This means an investment of Tk 10 lakh would have yielded a profit of Tk 22.50 lakh in seven months, akin to obtaining the fairy tale "Aladdin's Lamp"!
The main income for a mutual fund comes from stock market investments, and with the stock market performing poorly, mutual funds generally do not do well. Prime Finance First Mutual Fund's portfolio shows losses, making the price increase seem abnormal and possibly influenced by a special group.
A review of the data shows that on November 22, the price of each unit of Prime Finance First Mutual Fund was Tk 14.40. It gradually increased to Tk 46.80, a rise of Tk 32.40 or 255 percent. If an investor bought 10 lakh units on November 22, the market value would now be Tk 32.50 lakh, resulting in a profit of Tk 22.50 lakh in seven months—akin to getting the fairy tale "Aladdin's Lamp."
The fund's financial report for January to March this year, released in April, showed a per-unit loss of Tk 1.92 for three months of trading. During the same period in the previous fiscal year, the profit per unit was 5 paisa.
A review of the portfolio managed by ICB Asset Management Company as of June 30 shows losses in various sectors:
The fund invested Tk 5.18 crore in the banking sector, but the market price is now Tk 2.94 crore, resulting in an unrealized loss of Tk 2.24 crore.
In the cement sector, an investment of Tk 3.10 crore led to a loss of Tk 85 lakh, while the ceramic sector saw an investment of Tk 2.32 crore with a loss of Tk 1.13 crore.
The engineering sector had an investment of Tk 4.64 crore, incurring a loss of Tk 2.58 crore, and the leasing sector's investment of Tk 4.44 crore resulted in a loss of Tk 3.32 crore.
In the food sector, an investment of Tk 1.68 crore saw a loss of Tk 81 lakh. The power and energy sector had an investment of Tk 6.79 crore, leading to a loss of Tk 2.92 crore, and the insurance sector experienced a loss of Tk 38.50 lakh from an investment of Tk 87.10 lakh. In the miscellaneous sector, Tk 31.50 lakh was invested, resulting in a loss of Tk 1.20 lakh, while the pharmaceutical sector saw a loss of Tk 57.10 lakh from an investment of Tk 1.92 crore.
The telecom sector had an investment of Tk 53.20 lakh with a loss of Tk 10 lakh, and the textile sector saw a loss of Tk 1.10 crore from an investment of Tk 1.60 crore. Lastly, investments in mutual funds amounted to Tk 1.92 crore, with a loss of Tk 81.40 lakh.
In total, the fund's loss in the capital market is Tk 16.95 crore against an investment of Tk 35.99 crore, losing almost half of its invested money.
A DSE member, seeking annonimity, noted that mutual funds must invest 75 per cent of their total investment in the stock market, making it unusual for a fund to triple its price while losing around 50 per cent of its value. The regulatory body should investigate the matter.
When contacted, ICB Asset CEO Mahmuda Akhtar stated that they couldn't sell shares at the floor price and didn't rearrange the portfolio due to a bad market. She expressed skepticism about the price increase, attributing it to those buying the units.
Bangladesh Securities and Exchange Commission (BSEC) Executive Director and Spokesperson Mohammad Rezaul Karim said the price increase would be monitored, and any irregularities would result in action according to the rules.
