Kathmandu: Nepal’s capital market is witnessing a rapid surge in the presence of mutual funds, also known as collective investment schemes.
These funds pool money from small investors and strategically invest in various financial instruments and the stock market.
For individual investors with limited knowledge of the securities market and insufficient capacity for risk analysis, mutual funds are considered safer than direct entry into the market. To encourage this, the government has introduced tax incentives for mutual fund investments.
Growing popularity is attributed to the dual benefits of safety and transparency, alongside the potential for long-term returns.
Currently, 49 mutual funds—both closed-end and open-end—are active in Nepal, operated by banks and financial institutions. Among them, 39 are closed-end schemes and 10 are open-end schemes.
According to Nepal Stock Exchange (NEPSE) data, by the end of July, these funds had mobilized over Rs 58.95 billion (approx. US$ 441 million) into the stock market and other money market instruments. The total net worth of stock-based mutual funds stood at Rs 68.96 billion.
Mutual fund investments in securities amount to Rs 53.36 billion, primarily concentrated in listed company shares. While some investments are made in bank deposits and money market tools, these represent a relatively small portion.
With declining interest rates on bank deposits, government bonds, and treasury bills, mutual funds are increasingly turning to stock market investments, which are proving to be more effective.
Given the absence of strong institutional investors in Nepal, mutual funds play a vital role in stabilizing market fluctuations. Analysts believe they enhance long-term sustainability by investing based on company performance, corporate governance, and future potential.
Closed-end funds hold a larger share of investments. There are 28 closed-end funds with assets exceeding Rs 1 billion each. Eleven funds have assets between Rs 560 million and Rs 900 million. Some of the largest include Global IME Samunnat Scheme, with assets up to Rs 1.5 billion.
Notable funds include Siddhartha Equity Fund and NIBL Samriddhi Fund–2 (Rs 1.5 billion each), NMB Hybrid Fund L–2 (Rs 1.36 billion), NIBL Growth Fund (Rs 1.32 billion), Muktinath Mutual Fund–1, and Garima Samriddhi Scheme (Rs 1.25 billion each).
The 10 open-end funds have mobilized between Rs 400 million and nearly Rs 6 billion each. Five of them have assets exceeding Rs 1 billion. NIBL Participation Fund leads with Rs 5.98 billion, making it Nepal’s largest mutual fund scheme.
Other significant funds include NMB Saral Bachat Fund–E (over Rs 3.47 billion), NIC Asia Dynamic Debt Fund, Siddhartha Systematic Investment Scheme, and Nabil Flexi Cap Fund, each with assets exceeding Rs 3 billion. The remaining open-end funds range between Rs 400–620 million.
Rising investments and structured growth show Nepal’s mutual fund industry is expanding and gaining attractiveness. Dividends distributed in the last fiscal year have further boosted investor confidence.
While bank savings accounts currently yield around 2.75 percent and one-year fixed deposits around 5 percent, most mutual funds have declared far higher dividends. Some paid up to 21.05 percent, with 30 schemes offering at least 10 percent.
Laxmi Sunrise Capital’s six funds all provided double-digit dividends. Similarly, Siddhartha Capital, Sanima Capital, and RBB Merchant Banking–managed funds declared attractive returns.
Laxmi Unnati Fund distributed 20 percent, Siddhartha Investment Growth Scheme and Siddhartha Equity Fund each declared 20 percent, RBB Mutual Fund–1 also provided 20 percent, while Sanima Large Cap Fund offered the highest at 21.05 percent.
Despite many funds still trading below Net Asset Value (NAV), their performance has outpaced traditional bank deposits, making them an increasingly attractive investment option.
Once limited to a small group of investors, mutual funds are now popular among both retail and institutional investors. They are expected to expand capital supply in the stock market while contributing to long-term financial stability.
Securities Board of Nepal (SEBON) has approved the issuance of a Rs 4 billion Himalayan Life Insurance Mutual Fund, managed by Himalayan Investment Banker and promoted by Himalayan Life Insurance.
Similarly, SEBON has approved the Rs 1 billion RBB Focus 40 Mutual Fund, though its units are yet to be issued.
Applications are also pending with SEBON for the Rs 1 billion open-end Himalayan Long-Term Savings Scheme by Himalayan Capital, and the Rs 500 million Machhapuchhre SIP Scheme by Machhapuchhre Capital.
Additionally, seven closed-end mutual funds, collectively worth Rs 9.3 billion, are awaiting approval for unit issuance.
Comment Here