The Bangladesh Securities and Exchange Commission (BSEC) urged investors to consider the net asset value (NAV) of mutual funds before putting money into their units, warning against buying on rumours or market hype.
In a press release issued Monday, the regulator said it had recently noticed that units of some mutual funds were being traded on the stock market at prices significantly higher than their NAV per unit.
The commission said a wide gap between a unit's market price and its underlying NAV is a matter of particular caution for investors.
"The value of a mutual fund's underlying assets, or its NAV, is an important consideration," the BSEC said, adding that if a fund is liquidated, unitholders have no scope to receive more than the fund's net asset value.
Explaining how NAV is determined, the commission said mutual funds invest mainly in various financial instruments and other investable assets that can be liquidated quickly.
The total value of a fund's assets is determined on the basis of market prices, and the amount left after subtracting liabilities is the fund's NAV. Dividing the total NAV by the number of units gives the NAV per unit.
Asset managers regularly publish the NAV and related information of mutual funds in line with prescribed rules.
A mutual fund is a well-structured and regulated investment vehicle where money from investors is pooled and invested in various financial instruments and assets, the BSEC said.
Such funds are generally formed under a trust structure, with money raised from investors through the issuance of units on behalf of the trust, and invested in line with set policies.
Against this backdrop, the commission asked general investors to verify the latest published NAV per unit of the fund concerned, along with other relevant information, before making any investment decision.
It also advised investors not to invest solely on the basis of claims that a unit's market price has risen, or on rumours, information circulated on social media, or the instigation of any individual or group.
The BSEC further urged investors to make informed decisions after considering a fund's actual asset value, financial condition, tenure, nature of investment or portfolio, and other disclosed information.