It started a long time ago in a galaxy far far away! *Insert Star Wars theme music here*
Although the line above is not entirely true, we did think of setting up an Asset Management business quite some time ago. All of us worked for BRAC EPL Stock Brokerage Limited’s equity research department, providing research services to foreign asset managers. We saw how asset management firms worked globally and realized that an opportunity to manage international-quality mutual funds in Bangladesh existed.
Local investors in Bangladesh consistently lost money in stocks
There were a lot of reasons to doubt our plans.
There were more than 30 asset managers in Bangladesh before us. Bangladeshis have a strong belief that the stock market is highly manipulated and ‘the rules of finance’ do not apply. People are also very wary of ‘mutual funds’, something they are not familiar with.
All this negativity was not exactly irrational. Human beings learn from experience. Investors in Bangladesh stock market had extremely bad experience. Most of our friends and family who invested in the market have history of losing money. People have not forgotten the pains of the stock market crash that happened between 2010-2013 as their portfolios are yet to recover to those levels.
However, foreign asset managers made tremendous returns from the same market
Through working with international asset managers that invested in the Bangladesh stock market, we found an alternative reality. One in which healthy returns can be made from the same market where locals were only losing money.
Unknown to a lot of people, large global fund managers such as JP Morgan, Blackrock, Morgan Stanley, Alliance Bernstein etc invest in Bangladesh’s stock market. These fund managers sit in remote locations such as New York, London, Singapore and are not connected to the day-to-day rumor mill.
Yet, they have generated significant returns. Most of them also sold out of the market before the crash of 2010 and re-entered the market back in 2013.
So how did they achieve such returns without having insider information or having access to rumors?
The answer is very simple.
Most of these fund managers applied a very disciplined investment process. They only invested in well-managed companies with high governance standards and ignored the rest. They studied the business models and tried to buy at prices below fair value. Most were long term investors and ignored short term noise.
This process helped them avoid the crash of 2010 and enabled them to reinvest in 2013.
EDGE wants to become one of the role models in the asset management industry of Bangladesh
EDGE was started with the goal of becoming a role model in the Bangladesh Asset Management industry.
We have a specific investment philosophy and process which we will stick to at all times. We will remain fully transparent and will fight for our clients at all times. We will innovate to make our client’s life easier.
It is early days for us and we are small in size today. However, as long as we stay true to our purpose, we are hopeful of succeeding.