Mutual Funds Outpace Bank Deposits, Offer Double-Digit Returns Amid Sluggish Market

At a time when commercial banks have slashed their fixed deposit interest rates to below five percent, Nepal’s mutual funds have emerged as a highly lucrative alternative for investors. Despite the domestic stock market experiencing a prolonged sideways trend, collective investment schemes have successfully defied market gloom, with several announcing double-digit dividends from their profits of the last fiscal year. This stark contrast highlights a significant shift in yield generation, making mutual funds a more attractive safe haven compared to traditional bank savings.

Recent financial disclosures reveal that out of the thirteen mutual fund schemes that have announced their annual returns so far, eight have proposed dividends exceeding the five percent mark. Leading the dividend chart are Siddhartha Investment Growth Scheme-3, NMB Sulav Investment Fund-2, Kumari Dhanabriddhi Yojana, and Kumari Equity Fund, all of which have declared a robust 10 percent cash dividend. Following closely are Reliable Samriddhi Yojana with an 8.42 percent payout, alongside Siddhartha Investment Growth Scheme-2 and MBL Equity Fund, which are offering 8 percent each.

Financial analysts attribute these impressive returns to a diversified revenue model that extends far beyond regular secondary market trading. A major driver of their profitability is the statutory five percent quota allocated exclusively to mutual funds in all Initial Public Offerings (IPOs) and book-building processes. Acquiring these shares at face value and capitalizing on them post-listing yields substantial capital gains. Furthermore, these funds have effectively bolstered their balance sheets through high-yield debentures, previously locked-in high-interest bank deposits, and steady dividends from corporate equity holdings, shielding them from current low-interest banking environments.

While the top performers have secured high yields, other schemes have also maintained steady, albeit lower, distributions. NMB Saral Bachat Fund-E proposed 5.25 percent, while schemes like Kumari Sunaulo, NMB Hybrid L-2, NMB 50, and Siddhartha Systematic offered between 3 and 4.7 percent. Kumari Sabal Yojana stood at the lower end of the spectrum with a 2.9 percent return. For investors looking to capitalize on these announcements, six of these schemes have already closed their shareholders' books, while the book closure dates for three funds each from Siddhartha Capital and NMB Capital, along with Reliable Samriddhi Yojana, are rapidly approaching.

The strong dividend momentum is not strictly limited to mutual funds, as several listed corporate entities have also posted attractive payouts. Kamana Sewa Bikas Bank has proposed an impressive 15 percent cash dividend, while Shangrila Development Bank announced a combined 10.53 percent return, which includes a 4 percent bonus share. In the energy sector, Mandu Hydropower outshone others by proposing a massive 22.52 percent combined dividend covering the accumulated profits of two fiscal years, having already finalized its shareholder list in late August.