Announcement on the latest change in the Insurers Investment Directive will be made soon, Dr Fatta Bahadur KC, chairman of the Board, told Republica.[break]
Currently, insurance companies are allowed to invest in government bonds, corporate bonds, non-transferable preference shares, fixed deposits of banks and financial institutions, and stocks of public companies. However, in the case of putting money in investment funds, insurers were given only one option of state-owned Citizens Investment Trust (CIT).
Once the amendment comes into effect, life and non-life insurance companies can invest up to five percent of the gross investment amount in CIT or mutual funds.
As of now, life insurance companies are allowed to invest up to five percent of the gross investment amount in CIT.
Similarly, in the case of non- life insurance companies, up to 20 percent of gross investment amount can be invested in fixed deposit accounts of development banks and CIT. With the latest change, non-life insurance companies can invest up to 15 percent of the gross investment amount in fixed deposit accounts of development banks and another five percent in CIT or mutual funds.
The latest amendment in the Insurers Investment Directive comes at a time when Siddhartha Mutual Fund is all set to float Siddhartha Investment Growth Scheme-I - the first since promulgation of the Mutual Fund Regulation.
Under the scheme to be launched for public on November 28, the Fund is issuing 40 million units of securities with a face value of Rs 10. These securities will mature in five years.
The amount thus generated will be invested in the stock market and initial public offerings, according to Dhruba Timilsina, CEO of Siddhartha Capital Limited -- a subsidiary of Siddhartha Bank and manager of Siddhartha Mutual Fund. “But unlike investment in government bonds and debentures, investors taking part in the scheme will not be pledged a fixed return in advance.”
This means whatever profit made by mutual funds will be distributed equally among investors, but in case of losses, investors will lose equal amount of money as well.
“Although the scheme is not risk-free, it allows individual investors, who do not have idea on how stock market operates, an opportunity to make investment in secondary market. Besides, mutual funds are operated by a group of experts who have good understanding of various markets,” Timilsina said.
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