Key Takeaways
- • The Securities Board of Nepal (SEBON) has released a draft Collective Investment Fund Policy, 2083, aimed at systematizing mutual funds and mobilizing public savings into productive sectors through the capital market.
- • The draft proposes new fund categories beyond open-ended and closed-ended schemes, including ETFs, bond and money market funds, infrastructure and green funds, SME funds, and REITs.
- • The policy seeks to clarify responsibilities among fund promoters, scheme managers, trustees, depositories, registrars, and distributors, and to keep fund assets separate from manager and promoter assets.
- • Fee and disclosure provisions would link management fees to performance, cap total expense ratios, and require disclosure of risks, fees, benchmarks, and past performance.
- • Implementation is phased over 36 months, with basic improvements in the first 12 months and ETF and specialized fund development from 24 to 36 months.
Summary
The Securities Board of Nepal is preparing new rules for the country's mutual fund sector. According to Ratopati, the regulator has put forward the draft of the Collective Investment Fund Policy, 2083, with the stated objective of mobilizing public savings into productive sectors through the capital market and further systematizing collective investment funds.
The draft expands the range of investment options. In addition to the currently prevalent open-ended and closed-ended schemes, it aims to develop Exchange Traded Funds (ETFs), bond and money market-based funds, infrastructure and green funds, Small and Medium Enterprise (SME) funds, and Real Estate Investment Trusts (REITs). The policy also proposes systematizing regular unit purchase and repurchase, online services, regular Net Asset Value (NAV) publication, and liquidity management, as well as expanding Systematic Investment Plans (SIP), dividend reinvestment, switching between schemes (STP), and fixed-interval withdrawals (SWP). The draft prioritizes open-ended schemes.
Governance provisions focus on accountability. The draft seeks to clarify the roles of fund promoters, scheme managers, trustees or supervisors, depositories or custodians, registrars and transfer agents, and distributors, reduce overlapping responsibilities, control conflicts of interest, and keep fund assets segregated from those of the manager and promoter. It also requires fair valuation of securities that lack market prices, are unlisted, or are suspended, calls for independent valuation, and seeks to control concentration risk across a single company, group, sector, or instrument.
On fees and transparency, the draft links management fees to performance, sets limits on the total expense ratio, and applies benchmark, hurdle rate, and high-water mark principles to performance-based fees. Investors would receive disclosure of risks, fees, total expense ratio, benchmark, past performance, portfolio composition, and repurchase conditions.
The draft also outlines digitization, including online account opening, digital KYC, electronic payments, online unit transactions, and digital reporting, along with monitoring systems for market, credit, liquidity, operational, concentration, and cyber risks. Implementation would be phased: basic improvements within 12 months, expansion of bond, money market and fund-of-funds schemes from 12 to 24 months, and development of ETFs and specialized funds from 24 to 36 months, with other schemes and regulatory technology to follow.
The draft expands the range of investment options. In addition to the currently prevalent open-ended and closed-ended schemes, it aims to develop Exchange Traded Funds (ETFs), bond and money market-based funds, infrastructure and green funds, Small and Medium Enterprise (SME) funds, and Real Estate Investment Trusts (REITs). The policy also proposes systematizing regular unit purchase and repurchase, online services, regular Net Asset Value (NAV) publication, and liquidity management, as well as expanding Systematic Investment Plans (SIP), dividend reinvestment, switching between schemes (STP), and fixed-interval withdrawals (SWP). The draft prioritizes open-ended schemes.
Governance provisions focus on accountability. The draft seeks to clarify the roles of fund promoters, scheme managers, trustees or supervisors, depositories or custodians, registrars and transfer agents, and distributors, reduce overlapping responsibilities, control conflicts of interest, and keep fund assets segregated from those of the manager and promoter. It also requires fair valuation of securities that lack market prices, are unlisted, or are suspended, calls for independent valuation, and seeks to control concentration risk across a single company, group, sector, or instrument.
On fees and transparency, the draft links management fees to performance, sets limits on the total expense ratio, and applies benchmark, hurdle rate, and high-water mark principles to performance-based fees. Investors would receive disclosure of risks, fees, total expense ratio, benchmark, past performance, portfolio composition, and repurchase conditions.
The draft also outlines digitization, including online account opening, digital KYC, electronic payments, online unit transactions, and digital reporting, along with monitoring systems for market, credit, liquidity, operational, concentration, and cyber risks. Implementation would be phased: basic improvements within 12 months, expansion of bond, money market and fund-of-funds schemes from 12 to 24 months, and development of ETFs and specialized funds from 24 to 36 months, with other schemes and regulatory technology to follow.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.