The mutual fund sector should perform better as it has failed to play the expected role in developing a strong stock market in Bangladesh, stock market analysts said today.

They spoke at the launching ceremony of Sandhani AML SLIC Fixed Income Fund, in the auditorium of the Capital Market Journalists' Forum in Dhaka.

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

Mutual funds play a vital role in every stock market, but it failed to do so in Bangladesh, said Prof Mizanur Rahman, a commissioner of Bangladesh Securities and Exchange Commission (BSEC).

The mutual fund sector could not meet the expectation of the general investors, as in most cases it could not ensure a sustainable return when the market index drops, he said.

The Dhaka Stock Exchange (DSE) is hopeful to launch alternative trading board within next September and then the open-ended mutual funds would be allowed to trade in the board, said Tarique Amin Bhuiyan, managing director of the DSE.

There are 81 open-ended mutual funds that are not listed with the stock exchanges so the new board would be helpful for the mutual fund sector, he added.

Other than being more tax effective, investments in no-dividend mutual funds are safe as it is a fixed-income fund and the proceeds will be mostly invested in fixed-income instruments.

The initial target size of the fund is Tk 50 crore. Of that, Tk 10 crore was provided by the sponsor - Sandhani Life Insurance Company Limited.

The remaining Tk 40 crore will be subscribed by individual and institutional investors.

The initial subscription opened today and it will continue till August 30 this year.

Bangladesh General Insurance Company Limited (BGIC) and BRAC Bank Limited are the trustee and the custodian of the fund respectively.

Richard D' Rozario, president of the DSE Brokers' Association of Bangladesh; Mujibul Islam, chairman of Sandhani Life Insurance Company Limited; Anisuz Zaman Chowdhury, financial adviser of Bangladesh General Insurance; Shahed Chowdhury, chairman of Sandhani Asset Management, and Mir Ariful Islam managing director of Sandhani Asset Management, also spoke at the event.