Mutual funds allowed to invest more in stocks

The Bangladesh Securities and Exchange Commission (BSEC) has given go-ahead to mutual funds to invest up to 80 per cent of their funds in the stock market.

The stock market watchdog took the decision today to raise the investment limit for mutual funds from the existing 60 per cent in a bid to increase institutional investors' participation in the market, said a top official of the BSEC.

Mutual funds pool money from investors to channel it into securities such as stocks, bonds, and other assets. Depending on the profits earned, investors are then paid their share as dividends.

Some companies invest in non-listed securities and in most of the cases these investment decisions ultimately give low yield, the BSEC official said.

So, for the betterment of the investors' interest, the BSEC took the decision to allow them to invest more in the stock market, he added.

However, a top official of an asset management company, preferring anonymity, said the BSEC's decision would leave little impact on the stock market because the asset manager invests only in stocks, which they think have potential to grow. Until they see the potential, their investment would not come, he said.

Normally, when the stock market becomes bearish, the fund managers go to the non-listed securities to safeguard peoples' funds and ensure their return.

If any asset manager invests up to 80 per cent of their fund in the stock market, it will make them riskier considering the risk of the stock market, he added.