18 closed-end funds under ICB trusteeship face conversion or liquidation
Of the 20 mutual funds under ICB’s trusteeship, 18, including eight managed by ICB Asset Management Company, have fallen within the scope of the new regulations.
Around Tk3,000 crore worth of closed-end mutual funds under the trusteeship of the Investment Corporation of Bangladesh (ICB) are set to face conversion into open-end funds or liquidation under newly introduced mutual fund rules.
Of the 20 mutual funds under ICB's trusteeship, 18, including eight managed by ICB Asset Management Company, have fallen within the scope of the new regulations. This is even though the funds' original maturity periods run from 2027 to as late as 2033.
Under the rules, any closed-end mutual fund whose average trading price remains at a discount of 25% or more to its cost-based Net Asset Value (NAV) over six months must be converted into an open-end fund or liquidated.
The trustee must convene an extraordinary general meeting (EGM), seek unit holder approval, and obtain subsequent clearance from the Bangladesh Securities and Exchange Commission (BSEC). A decision requires at least 75% support from votes cast.
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Data show that the discount between market prices and cost-based NAVs for the 18 affected funds ranges from 30% to 76% – well above the 25% threshold – making conversion or liquidation mandatory, subject to unit holder voting.
BSEC Executive Director and spokesperson Abul Kalam told The Business Standard that trustees would arrange unit holder meetings and implement whichever decision clears the 75% threshold.
The process became entangled in legal complications after investors filed writ petitions challenging the rules, prompting the High Court to issue a status quo order. On 9 June, BSEC directed trustees to proceed with conversion or liquidation.
Two days later, it issued a follow-up letter instructing trustees to continue while excluding the interests of petitioning unit holders – a move that alarmed market participants who feared compliance could be construed as a violation of the court order. ICB consequently sought clarification from the regulator and withheld action.
The impasse ended on 17 June when the Appellate Division's Chamber Court stayed the High Court order, clearing the path for the process to resume. Lawyers said trustees may now move forward, though an ICB trustee official said the organisation had yet to receive fresh instructions.
"We heard about the stay order, but have not received any instruction from the commission. We have already written to them seeking guidance," the official said.
Stakeholders continue to object to certain provisions, particularly Section 62, of the new rules. A senior asset management official, speaking anonymously, noted the rules were framed under the previous commission and called on the new commission to engage asset managers and trustees on their concerns.
Bangladesh RACE Asset Management, which has also filed a writ petition, is scheduled for a hearing on 22 June.
ICB Asset Management Company operates nine mutual funds, eight of which are caught by the new rules, with discounts to cost-based NAV ranging from 47% to 67%. All six funds managed by Bangladesh RACE Asset Management PCL also exceed the threshold and face conversion or liquidation.
Across the broader mutual fund industry, total approved fund size stands at Tk13,090 crore – 35 closed-end funds accounting for Tk4,431 crore and 105 open-end funds for Tk8,659.5 crore.
