NIBL Capital to Issue open-ended mutual fund units from 19th Jestha ; What is open ended mutual fund ?
The IPO worth Rs 12.5 crores will commence from Jestha 19th and end on 22nd Jestha, if early. With the name "NIBL Sahabhagita Fund" this will be first open ended mutual fund in the country.
A total of 1.25 crore units with the face value of Rs 10 will be issued in the market. Initially at first stage, the fund will be issuing only 1.25 crore units worth Rs 12.5 crore to general public and 15% of total fund i.e. 75 lakhs units worth Rs 7.5 crore is reserved to fund sponsor NIB Bank and fund manager NIBL ACE Capital Limited as a seed capital.
Basically, Open ended mutual funds are not trade-able in the stock exchange. One can buy and sell the units from the respective merchant banks on trading days. The NAV of the units changes everyday depending upon the market fluctuations. These funds also do not have a fixed maturity period. The investments of the open-ended fund are valued at the fair market value which is also the closing market value of listed public securities.
- Systematic Investment Plan : Close-ended funds require you to invest a lump sum to buy the units of the fund at the time of their launch. This can be indeed a risky approach to deal with your investments. It exposes you to take bigger bets than otherwise warranted. However, open-ended funds is a suitable investment option for a large number of salaried class of investors. It is because they can initiate Systematic Investment Plans (SIP) into the fund of their choice. Open-ended funds offer high liquidity because you are able to redeem units of the fund as per your convenience. As compared to other types of long-term investments, which can be highly illiquid, open-ended funds offer the flexibility of redemption at the prevailing Net Asset Value (NAV).
- Liquidity : Open-ended funds offer high liquidity because you are able to redeem units of the fund as per your convenience. As compared to other types of long-term investments, which can be highly illiquid, open-ended funds offer the flexibility of redemption at the prevailing Net Asset Value (NAV).
Since this concept is introduced first time in Nepal, there may be some exceptional cases. We will follow up the details in our upcoming post.
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