Understand the fundamental differences between NEPSE-listed close-ended schemes and flexible open-ended SIP funds.
Mutual funds in Nepal come in two distinct regulatory structures: close-ended schemes and open-ended schemes. Close-ended funds raise a fixed corpus during an initial public issue (NFO), list on NEPSE, and mature after a set tenure (typically 7 to 10 years). Open-ended funds continuously issue and redeem units at the official daily Net Asset Value (NAV), offering unlimited entry and exit without needing a stock broker.
Many retail investors in Nepal buy close-ended mutual funds on NEPSE expecting easy liquidity, only to discover poor trading volume or steep discounts where an NAV of NPR 12 trades at only NPR 9.50 on TMS. Conversely, investors wanting to build long-term wealth through monthly SIPs often do not realize that open-ended funds allow automated monthly investing from as low as NPR 1,000 without brokerage costs.
Close-ended funds trade on NEPSE just like ordinary equity shares through your broker TMS account. Open-ended funds do not trade on NEPSE; you transact directly via the capital manager's digital portal.
Close-ended fund prices are set by supply and demand on NEPSE, often trading at a discount or premium to actual asset backing. Open-ended fund units are always transacted at the calculated daily NAV.
Close-ended funds require lump-sum purchases in round lots of 100 units on the secondary market. Open-ended schemes allow automated monthly SIPs, unit additions, and partial withdrawals anytime.
When a close-ended fund reaches its 7-10 year term, the fund liquidates all assets and distributes cash to unit-holders. Open-ended schemes operate perpetually, allowing you to stay invested for decades.
| Feature | Open-Ended Scheme (e.g. NIBL Sahabhagita) | Close-Ended Scheme (e.g. NMBHF, SEF) | Investor Recommendation |
|---|---|---|---|
| Trading Platform | Direct with AMC Portal / Counter | NEPSE Secondary Market (TMS) | Open-ended avoids broker commissions |
| Unit Price | Exact Daily NAV (e.g. NPR 11.45) | Market Demand/Supply (Often Discounted) | Close-ended can offer deep discount value |
| SIP & DREP Support | Full automated SIP & DREP available | Not supported (Lump-sum only) | Open-ended is superior for monthly savers |
| Maturity Term | Perpetual (No expiry date) | Fixed (5, 7, or 10 Years) | Open-ended for multi-decade compounding |
| Liquidity / Exit | AMC buys back units at NAV minus exit load | Dependent on finding a buyer on NEPSE TMS | Open-ended offers guaranteed liquidity |
Under SEBON's Mutual Fund Regulations 2067, close-ended funds dominated Nepal for decades. However, since the launch of Nepal's first open-ended fund (NIBL Sahabhagita Fund in 2019), open-ended schemes managed by capital houses like Siddhartha Capital, NMB Capital, Sanima Capital, and NIC Asia Capital have surged. Close-ended funds in Nepal historically trade at an average discount of 12% to 20% to NAV due to retail investor preference for volatile speculative stocks over defensive mutual funds.
Aruna wanted to invest NPR 5,000 every month into the Nepali market. A broker suggested she buy 500 units of a close-ended mutual fund on NEPSE each month.
She realized that buying close-ended funds on NEPSE incurred minimum broker commissions, DP fees, and odd-lot hassles every single month. Instead, she registered for an online SIP in an open-ended mutual fund via connectIPS. Now, NPR 5,000 is auto-debited each month at zero brokerage, fully compounded via DREP.
Goal & Dilemma: Allocating NPR 10,000 monthly for a 5-year investment horizon.
Current market price quoted on TMS.
Audited net asset value per unit published by AMC.
If a close-ended fund has NAV = NPR 12.00, but trades at NPR 9.60 on NEPSE: Discount = [(9.60 - 12.00) / 12.00] × 100% = -20.0%. Buying at a 20% discount means acquiring NPR 100 worth of portfolio assets for just NPR 80!
Trying to start a monthly SIP in a close-ended mutual fund on NEPSE.
SIP is only possible in open-ended mutual funds directly through capital merchant bankers.
Selling close-ended fund units at massive distress discounts on NEPSE when maturity is near.
Hold until maturity if the fund is within 1-2 years of expiration to redeem at 100% NAV value.
Believing open-ended funds guarantee fixed interest returns like a bank FD.
Mutual funds invest in market equities and debt; returns fluctuate with market performance.
Yes. You can place a redemption order on the fund manager's online portal on any working business day. The funds are credited directly to your bank account via connectIPS within 2 to 4 working days.
Because retail investors on NEPSE prefer volatile individual stocks with high speculative potential. The lack of active buying interest creates discounts where funds trade below their true liquidation value.
Yes. Fund managers declare annual dividends based on realized portfolio profits. Investors can choose to receive cash or enroll in DREP to receive additional units.
An exit load is a small fee (typically 0.5% to 1.5%) deducted by the fund manager if an investor redeems their units within a short initial holding period (e.g. within 6 to 12 months).
You can purchase directly online through the respective merchant bank's digital portal (e.g., NIBL Ace, Siddhartha Capital, Nabil Invest) paying seamlessly via ConnectIPS.