Contrary to many opinions, investment manager Shekh Mohammad Rashedul Hasan believes that the Bangladesh capital market offers a significant opportunity to build long-term wealth in a sustainable manner.
“Our capital market is much more promising than it looks,” said Hasan, Managing Director and CEO of promising next-generation asset management firm, UCB Asset Management – a wholly owned subsidiary of the United Commercial Bank.
In a recent exclusive interview with The Business Standard, he said: “People mainly talk about the rise and fall of the stock market, the speculative nature and the alleged manipulation, while as investment managers professional, we deepen the listed companies that have a track of several decades. above-average wealth creation record for their shareholders. “
The market can go up, stay stable or go down over a period of time to impact the value of investors’ portfolio. That aside, the most important thing for long-term wealth creation is finding the right industry and the right company for the investment, he observed.
For example, a decade after the stock market crash of 2010, the market has continually eroded investor capital. But his analyzes found a basket of at least 10 listed companies that created about 20% annualized returns for their shareholders during the decade of the stock market depression.
“As these companies are led by the best professionals in the industry and, more importantly, led by a knowledgeable board of directors, the generation of constant wealth for shareholders was a natural consequence.”
The best alternative to savers
Historically, Bangladeshis are not investors. Instead, they save for fixed income securities or own real estate or gold for asset appreciation.
They need better options now because money is cheap and bank deposits are no longer lucrative, subsidized national savings certificates already have certain investment limits which are insufficient for wealthy savers. Real estate and gold do not have a structured market that offers sufficient liquidity.
Long-term investment in good mutual funds is the best option for them, Rashedul believes.
“In the long run, it’s critical to identify the big companies and pick the right stocks,” said Rashedul Hasan, who served the investment management industry for more than a decade after graduating with a bachelor’s degree in engineering. and his MBA in Finance, both from top local universities. .
“Your assets have grown at an annual compound rate of 20% over the past decade, I find nothing more surprising in the long run, as fixed income alternatives offered about less than half the return and are now hovering even higher. low as interest rates have fallen dramatically. since the start of the pandemic last year.
Past performance is no guarantee of future returns, but professional investment managers with their vast knowledge, vast experience, patient and disciplined approach to investing can better choose future winners, for sure.
Rashedul Hasan’s team includes seasoned investment professionals and young finance talent with global credentials such as the CFA charter, while all team members pursue their global certifications for the investment industry. investment.
“We have a diverse team and all of its members have had exceptional success in their academic careers,” he added.
While discussing his team’s investment cases, Rashedul Hasan said that the top three pharmaceutical companies listed on the Dhaka Stock Exchange have doubled their annual sales every five years for the past two decades and, more surprisingly, with a gross profit margin of 40 to 50%, one of the highest in the region.
So why do these stocks appreciate less than the stocks of very low paying companies during the bull market?
This is because during the bull run, especially when primarily driven by liquidity, the market here tends to be dominated by speculation and the herd mentality that only cares about immediate gains, instead of creation. long-term and lasting wealth, Rashedul Hasan observed.
The scenario would have been different if professional fund managers had managed far more than meager less than 5% of existing funds relative to the total market cap, he added.
He hopes, however, that the mutual fund industry will prosper greatly in the years to come, especially after major commercial banks, such as the United Commercial Bank, invest seriously in asset management businesses, which are also taking over. the management of bank investments. themselves traditional bankers.
“The stock market is a game of poorly valued assets, neither an unjustified price appreciation persists here for a long time, nor the depression of good stocks,” he stressed the need to analyze the fundamentals of companies for long-term gains.
The outperformance of professional fund managers during the last few years of market depression is also helping the sector gain the trust of many clients.
Growing response from potential investors
UCB Asset Management has worked tirelessly to engage savers in achieving better long-term returns.
A growing number of savers, now in a bind, are desperately looking for better alternatives to term deposits. But, they don’t want to take risks in the stock market.
Along with the lucrative yield performance of its first year in business, UCB Asset Management has found some advantages as a subsidiary of its parent bank as the bank itself uses its professional investment managers to manage its own fund.
“In addition, many institutions that are not investment experts also talk to us and entrust us with the management of their funds – both with fresh funds and their existing stock portfolios which have been strained during the various phases of the markets. market cycles, ”he said.
What the investment management industry needs now
The industry needs more investment alternatives such as fixed income investments in Treasuries, various corporate bonds and of course more and more listed companies with strong fundamentals, Rashedul said.
Government-issued Treasury bonds considered risk-free investments around the world are not yet traded on a stock exchange and the market and asset managers absolutely need to trade Treasury bonds because they are about the very first step in developing a fixed income market.
The government must also revoke policies that are hurting the growth of the mutual industry, he said, referring to taxes imposed on mutual funds.
There is no capital gains tax for individuals when they invest directly in the market. However, when a mutual fund realizes capital gains on an investment portfolio and shares the same gain with retail investors in the form of dividends which are subject to tax.
In addition, cash dividends earned by mutual funds are double taxed when delivered to unitholders as cash dividends.
“Upon hearing this, why would an individual consider investing in mutual funds? Said Rashedul Hassan.
The capital market has come a long way over the past two decades in terms of a lot of things, and it has a long way to go, observes the asset manager.
Now the exchanges have globally recognized indices, the accounting and auditing practices of companies have improved a lot and, most importantly, the investment industry is receiving an increasing number of talent, which regulators are better able to solve. problems and needs for change, according to Rashedul Hasan.
He is very optimistic about the future of the capital market as the economy grows with its growth potential, while the successes of some industries and companies are truly excellent and the establishment of an income securities market. fixed has become a priority area for market regulators.
“If you look at the history of the global stock markets, despite their ups and downs, the bottom line has been on the rise over decades and even centuries. Why not ours, when the economy is growing at a tremendous rate? he said.