u/Comprehensive-Bet29

This will actually be huge if actually implemented.

Globally around 50% of market capitalization is owned by big institutions like pension funds, mutual funds, insurance companies.

Nepal ma institutional investors do not significantly influence the market , nor have they invested heavily in the market yet.

For instance, before last year insurance companies were restricted to invest in the capital market upto just 10% of their investment fund. Recently it has been increased to 15%.

Now if implemented according to Niti tatha karyakram , some % of trillions of fund with CIT And EPF might flow to the market , along with increased limits for insurance would be huge for long term sustainable growth of Capital market of Nepal.

Currently investments are too restrictive with almost 80% mandated into Fixed instruments, but once such big institutions are allowed to invest in the market, they'll actually become market makers , and hopefully the market becomes more stable in coming days like of developed markets.

( NRN chahi ava every year sunirako ho, so it's more like I'll believe it when I see it )

It's an open book that mutual funds haven't really been performing very well in Nepal. Most of their performance has been masked by IPO allocations and, more recently, book building allocations. Some of them, even with all this, can't generate 6–7% returns, whereas the market itself generates around 12–13%.

As someone in the industry, I think the problem is more structural. No one really cares if the fund performs or not. They get their normal annual raises and promotions every 2 years. The good fund managers and analysts don’t even bother to stay in Nepal, they simply go abroad for Ivy League colleges or keep switching companies.

So by structure, we are left with very mediocre people running the funds, people who are okay with mediocre salaries and nominal raises since they don’t really have better options. And these are the people managing your money. They don’t care about performance simply because appraisals are not based on fund performance or anything meaningful.

They get their ~1.5%-1.75% fees on AUM regardless.

Suppose a capital has 3 mutual funds with 7 billion in AUM. They will earn roughly 10–12 crore annually regardless of whether they generate 2% return or 12%. So the CEO or senior management don’t really care about having good people managing the funds. They simply diversify blindly by putting 2–3% in every stock.

Hence the structural problem.If fund managers were paid based on performance, I think most of this would be solved. There needs to be real accountability. I hope SEBON looks into this, the new chairman or RSP actually look into this and force the industry to perform and end this free lunch. Otherwise, mutual funds and CEOs of capitals will keep doing nothing and enjoying their salaries, while unit holders (general public) get mediocre returns, talented people leave the country, and no one really benefits excepts those CEOs .

I hope more people speak up and this issue gets traction with the new incoming SEBON chairman. How long before we end this cycle of Free lunch and playing with PUBLICS MONEY.