Tehran, Jan. 01(SENA) – The mutual funds were in a far better condition in 2016 compared with early 2015; both in terms of yield and asset under management. Given the fact that the fixed income mutual funds managed to absorb a substantial amount of capital and also the relative improvement of stock market in first season of 2016, equity mutual funds yielded fairly well for the owners of investment units.
Mutual funds; as one of the most important financial institutions in capital market, seems to have been palyed a more active role in the past year than ever. The unique and rapid growth of asset under management of mutual funds attracted financial activist’s attention in 2015. Last year, the mutual funds managed to increase their total asset value to 363,170 billion rials, of which 356,620 billion rials pertained to capital absorption from fixed income funds through banking system. The total asset value of mutual funds reached 406,100 billion rials in early 2016, up from 42,700 billion rials in the beginning of 2015.
The total asset value of all mutual funds increased dramatically from March 2016 to mid-August 2016. Accordingly, they experienced a value appreciation of 482,430 billion rials. Of note, the fixed income funds also experienced a value appreciation of 471,190 rials in the same period. The total AUM of mutual funds was aggregated 888,540 billion rials in mid-August 2016.
Deepening the debt market is one of the most important implications of the growth. In other words, fixed income funds are required to allocate much of their portfolio to fixed income securities and bank deposits which increase naturally the demand for purchase of fixed income securities.
Mutual funds were also successful in absorbing the individual’s capital, so that the number of individuals in this realm was 167,797 in March 2015. From another point of view, the individuals owned 77% of the assets under management of mutual funds. Surprisingly, the number of individual investors reached 981,958 in late June 2016, owning 91% of the assets under management of mutual funds.
The institutions were also interested in investing in such funds. While the number of institutional investors was 1,317 in March 2015, it reached 2,714 in June 2016.
The researches indicated that from March to mid-August in 2016, mutual funds absorbed 46,924 billion rials from issuing new units for new investors. In the same period, the fund industry witnessed that capital flowing out of previous investment units which was equivalent to 178,080 billion rials in as much as redeeming their units.
The aggregate capital inflow and outflow of fixed income funds from March 2016 to mid-August was 465,440 and 177,050 billion rials, respectively.
One of the most important events of 2016 was the letter sent by the banks and credit institutions supervision office in March 2016. According to the letter, banks and credit institutions were urged to avoid paying interests more than the rates approved by the Money and Credit Council on 16th February 2016. The letter warned that any violation of the directive could disrupt the equilibrium of money market.
Convergent supervision was another debate which was put forward at the beginning of 2016. According to authorities, the fixed income funds should be under supervision of both the Central Bank of Iran and the Securities & Exchanges Organization. It is just a matter of time to see what decision will be made by the officials of money and capital markets. This must be taken into account that the supervisory authority of the capital market is accountable for such funds in the first place. However, considering the nature and performance of mutual funds, the CBI is also bound to supervise them. Indeed, it is impossible to avoid interference between capital market and money market under these circumstances.
Among the most important effects of this letter, we can refer to:
1) Eliminating the guarantee of profitability from all mutual funds; and
2) Meaningful reduction of predicted interest rate paid by fixed income funds.
As a result of these changes, the predicted annual interest rates of fixed income funds range between 18% and 20%. The average rate is 18.5%. Since the banks and credit institutions reduced the interest rate of bank deposits, we expect the funds to reduce the predicted interest rate too.
We are now hoping that the growth and expansion of mutual funds, which in turn gathered a substantial amount of resources, would be finally beneficial for Iran's capital market (both debt and stock markets).
Research & Development Department of Part Financial Data Processing.