RACE's six mutual funds incur Tk89cr losses in Q2 due to 'BO suspension'
As part of the order, fund trustees and custodians were also instructed to submit detailed reports on the financial activities of these funds
Bangladesh RACE Management PCL reported a combined loss of Tk89 crore for six of its managed mutual funds in the October-December quarter of the current fiscal year.
The country's largest asset manager attributed this substantial loss to halted trading activities caused by the suspension of beneficiary owner (BO) accounts registered under these funds.
RACE manages 10 closed-end mutual funds and holds the highest market share of over 47%, with assets worth around Tk2,500 crore.
Out of these funds, six have disclosed their second-quarter financial results, while the remaining four are yet to report, according to the Dhaka Stock Exchange (DSE).
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The six mutual funds that reported losses are EBL First Mutual Fund, Trust Bank 1st Mutual Fund, IFIC Bank 1st Mutual Fund, First Janata Bank Mutual Fund, First Bangladesh Fixed Income Fund, and Exim Bank 1st Mutual Fund.
The asset manager revealed that the combined losses of these six funds surged by 356% compared to the same period in the previous year.
AKM Mamunur Rashid, chief compliance officer of RACE, told The Business Standard, "Since June 2024, we have been unable to execute any trades due to restrictions. During this period, fund provisions have increased in response to the market downturn."
On 24 June 2024, the Bangladesh Securities and Exchange Commission (BSEC), led by Shibli Rubayat-Ul Islam, suspended all BO accounts registered under mutual funds managed by RACE.
The suspension followed a BSEC inquiry that found the asset manager had failed to "protect unit holders' interests."
As part of the order, fund trustees and custodians were also instructed to submit detailed reports on the financial activities of these funds.
RACE had opened BO accounts with Multi Securities and Services, The Smart Trades, Trust Bank Securities, and many other brokers in breach of the Mutual Fund Rules 2001, which require asset management companies (AMCs) to keep assets of mutual funds under the supervision of custodians approved by the regulator, according to the BSEC order.
Earlier, on 6 June 2024, the BSEC formed an inquiry committee to investigate allegations of fund mismanagement by RACE. Based on the committee's recommendations, the commission directed stock exchanges to suspend block market trading of the funds' underlying securities to prevent any potential diversion of assets.
Later, on 16 February 2025, the BSEC, led by Khondoker Rashed Maqsood, withdrew the suspension order. Following this decision, there are no longer any restrictions on operating the BO accounts of these mutual funds, according to the BSEC.
Mamunur Rashid stated that around 70% of the mutual fund sector's assets in the capital market have remained tied up in various investigations for an extended period, significantly impacting the industry.
He noted that the new BSEC leadership has addressed these issues in a more market-friendly manner, allowing the funds to play a more effective role in strengthening the capital market.
"Since the beginning of our fund management journey 15 years ago, RACE has distributed approximately Tk1,800 crore in dividends to investors. We remain committed to continuing this in the best interest of our investors," he added.
Meanwhile, RACE-managed mutual funds did not declare any dividends for FY24 due to incurred losses, which were primarily attributed to the market downturn. Currently, all ten mutual funds are trading at a discount to their net asset value (NAV) per unit.
