Formation of Popular Life First Mutual Fund:

Over the last decade, the Bangladesh capital market has grown rapidly in size and volume through the efforts of regulators, local exchanges, brokerages, merchant banks and other institutions. Yet the nature and composition of this growth has given rise to some structural problems, such as excessive volatility, speculation based investing, and unusual churn.  One of the most effective solutions to these structural issues is by increasing increased participation of mutual funds in our capital markets … firstly, mutual funds by virtue of being managed by professionals with the right expertise usually invest on the basis of fundamental research and protect such investments from catastrophic loss through proper risk-management. Thus, mutual funds “invest” rather than “speculate” and can play a vital role in institutionalizing the market and act as a counterweight to excessive market volatility and manipulation. Secondly, mutual funds pool investment capital from thousands of retail investors and institutions that are not market specialists; by doing so mutual funds can bring retail investors’ funs under an institutional umbrella and thereby protecting these small investors from excessive volatility and speculation.

Realizing the vital role that mutual funds can play in improving the capital market efficiency, Popular Life Insurance Company Limited, has come forward and decided to sponsor Popular Life First Mutual Fund. Incorporated in September, 2000, Popular Life Insurance Co. Ltd provides ordinary life insurance and non-traditional micro insurance products. With an authorized and paid up capital of Tk. 25 crores and Tk. 11 crores respectively, the company is listed in both Dhaka & Chittagong Stock Exchange. With over 182 locations servicing a total life insurance fund of Tk. 922 crores and maintaining the lowest claim-to-premium ratios, the company is regarded as the best-managed life insurance companies in the country.  The company is also a pioneer in the micro insurance business in the country. The company was rewarded with the “Best micro finance organizer” award in 2007.

The company actively participates in various corporate social responsibility (CSR) programs. Among these activities, the important ones are campaign against drug abuse and human trafficking, tree plantation etc. With the motto to provide cordial and best service to the policyholders, the company is relentlessly reinforcing their emphasis on sustainable growth within a frame work of trust, integrity, good governance and compliance with the legal and regulatory frame work of the country.

In this endeavor, POPULAR LIFE FIRST MUTUAL FUND has chosen three trusted partners with successful track record in the Bangladeshi mutual fund industry: Bangladesh RACE Management PCL as the Fund Manager and the Bangladesh General Insurance Company (BGIC) as the Trustee and Standard Chartered Bank as the Custodian of the Fund.

Formation of the Proposed Mutual Fund in the Context of Present Market Scenario:

Since 2006, a number of factors have increased the popularity of stock market investing among Bangladeshi retail investors, including: rising income, low interest rates in traditional bank savings accounts, large stock investment gains, and increased media coverage. This exponential increase in demand is reflected in the 10x growth in average daily trading volume in the stock market during the last 3 years – from Tk. 200 crores in 2006-07 to its current Tk. 2,000 crores.

Despite this significant growth in investor participation in the Bangladeshi stock market, and the demand for professionally managed investment vehicles, the domestic mutual fund industry has not responded with adequate supply. With only 28 individual funds to choose and about Tk. 2,900 crores in funds under management, the mutual fund industry has been slow to respond to current capital market realities and comprises only a small percentage of the total stock market investments.  As a result, existing mutual funds in the market are trading at premium to their NAVs while the recent launches have been significantly oversubscribed. To fulfill this large unsatisfied demand for mutual fund investments in Bangladesh, Popular Life Insurance Company is floating the POPULAR LIFE FIRST MUTUAL FUND.   In this endeavor, Popular Life Insurance Company has appointed Bangladesh RACE Management PCL to be the Fund Manager; RACE has a successful track record in the Bangladesh stock market having achieved the largest private Asset Management Company in terms of funds under management in Bangladesh landmark within a little more than year.

Advantages in investing in Popular Life First Mutual Fund:

Generally investment in mutual funds enjoys some additional advantages compared to investments made directly in other securities of the capital market. Investors of this mutual fund should be able to enjoy the following advantages.

1. The Fund will maintain a diversified portfolio which will lower the investment risk for investors.
2. The diversified portfolio will allow investors gain a broad exposure to the overall stock market which may not be possible at the individual level.
3. This Fund provides access to extensive local research and investment experience. The Fund Manager, Bangladesh RACE Management PCL has developed deep insight into the dynamics of the local capital markets. RACE’s research department consistently produces insightful research products on the Bangladeshi stock market which have been highly commended by both local stock market participants and foreign investors.
4. As the management of the investments in the Fund is outsourced to a professional Asset Management Company, investors will be relieved from any emotional stress associated with day-to-day management of individual investment portfolio. In fact, investment management usually requires a significant amount of time-consuming research and analyses to identify the highest-quality securities which may not be doable for the general investor and is, therefore, best left to professional investment managers.
5. The investors will be able to save in transaction cost as he/she has access to a larger number of securities by purchasing a single unit of POPULAR LIFE FIRST MUTUAL FUND.
6. Income will be tax free up to certain level, which is permitted as per Finance Act.
7. Investment in the Fund would qualify for investment tax credit under section 44(2) of the Income Tax Ordinance 1984.
8. Management and operation of Mutual Funds are subject to strict regulations from Bangladesh Bank, SEC and the Trustee. SEC regularly monitors the performance of such funds. The laws governing mutual funds require exhaustive disclosures to the regulator and general public and, as such mutual funds are one of the most transparent investment vehicles in Bangladesh.
9. In Bangladesh, the mutual funds enjoy a 10% (ten percent) reserved quota in all Initial Public Offerings (IPOs). Given the lack of supply of high-quality scripts in the Bangladeshi stock market, IPOs have historically outperformed the general Bangladeshi market index significantly and, therefore, have been a major source of outperformance for the mutual fund industry in Bangladesh.

The constitution of the Fund:

Popular Life First Mutual Fund has been constituted through a Trust Deed entered into between Popular Life Insurance Company Limited and Bangladesh General Insurance Company on April 21, 2010 under the Trust Act, 1882 and Registration Act, 1908.

The Fund was registered by the SEC on April 29, 2010 under the সিকিউরিটিজ ও এক্সচেঞ্জ কমিশন (মিউচ্যুয়াল ফান্ড) বিধিমালা, ২০০১.

Life of the Fund:

The Fund is a closed‐end mutual fund of 10 (Ten) years. As per BSEC’s Directive No BSEC/CMRRCD/2006-157/210/Admin/83, dated October 02, 2018, the tenure of the fund may be increased up to another 10 years, established with a view to broaden the base of investment and develop the capital market.

The Trust Deed also provides the flexibility to the unit-holders to extend the tenure of the fund beyond the initial 10 years.

Size, Face Value and Market Lot of the Fund:

• The initial Fund is fixed at 200,000,000 (twenty crore) units of Tk. 10 each totaling Tk. 2,000,000,000 (Taka two hundred crore).
• The Sponsor’s portion of the Fund is 20,000,000 (two crore) units of Tk. 10 each totaling Tk. 200,000,000 (Taka twenty crore).
• Size of the Pre-IPO Private Placement is 80,000,000 (eight crore) units of Tk. 10 each totaling Tk. 800,000,000 (Taka eighty crore)
• Size of the Initial Public Offering (IPO) is 100,000,000 (ten crore) units, each worth Tk. 10, totaling Tk. 1,000,000,000 (Taka Hundred crore) available as public offering to general public, NRBs, Mutual Funds and collective investment schemes.