KARACHI – Despite the fact that the KSE-100 has performed relatively well, one sector which has not fared as well is the closed-end mutual funds sector. Recently, certain mutual funds have indicated they are looking to convert themselves from being closed-end to being open-end.
Therefore, the high level of discount applicable to the net asset value (NAV) of the funds has reduced significantly for those where conversion has already been announced. The lowest discount level is for Al-Meezan Mutual Fund (AMMF), which is already in the process of conversion to an open-end scheme. For this purpose, AMMF is holding an EOGM on April 27 to gain approval from its shareholders. The conversion process remains dependent on the approval of the SECP, which should not be a problem as there have been quite a few cases of conversion in recent years.
Basing an assumption on the conversion witnessed in the last few years and the most recent example of AMMF, it is believed that some of the other funds in the market may also be looking to convert themselves into an open-end scheme, said Khalid Iqbal at Investfinance.
Therefore, it is deemed to present an opportunity to investors to profit from the huge discount level as compared to the NAV of these funds. He pointed out that a conversion has to be managed carefully, as closed-end funds have a captive AUM, while following conversion to open-end, AUM may become volatile as investors have the option to shift their funds and impact management fees as well.
