In Iran, activities of mutual funds have begun after the passage of stock market law in 2006. The first Iranian Mutual fund as a fixed income fund was established in 2007. A year later in 2008, the first equity mutual fund appeared in Iran. They grew fast and became an important player in Iran capital market. In terms of structure, there are 3 main categories of funds which are: Fixed Income Funds, Stock Funds and Hybrid Funds. There are some other categories such as passive funds versus actively managed funds, Exchange-Traded Funds (ETF) and Housing and Building Funds.
Fixed Income Mutual Funds:
These funds invest their equities mainly in Sukuk (such as Sukuk Al-Musharakah, Islamic Treasury Bonds, Certificates of Deposit and etc.) and other fixed income bonds. In Iran, these funds have the obligatory to invest at least 70% of their money in these bonds, which means that they have the right to invest up to 30% of their equities in stocks. Based on the Stock Exchange Organization`s report, there are 59 different fixed income funds in Iran.
In Iran, Stock funds are the funds that invest 70% of their assets in the stocks of Tehran Stock Exchange or Iran Fara Bourse. Based on funds` sizes, there are 2 types of stock funds. In small stock funds, the range of their units can be between 5,000 to 50,000, While in big funds, the range of their units is between 50,000 to 500,000. Based on the Stock Exchange Organization`s reports, there are 98 stock funds in Iran.
Hybrid funds have to invest at least 40% of their assets in fixed income bonds and at least 40% in stocks, based on the quorum laws in SEO. Based on the SEO`s reports, there are 17 Hybrid funds in Iran.
The expenses of mutual funds are between 1 to 5%. Their redemption and creation are not costly but usually needs to go the distributors’ office which could be banks, brokers, investment banks, etc.
Table : Mutual funds’ net asset value and investors
Table : Mutual Funds’ Return
The first ETF in Iran Capital Market was launched in the last days of August 2013, after about 6 years of first mutual fund appearing in this market. But despite of mutual funds which had amazing growth, ETFs’ trend is waiting for their best days yet.
Table : The number and total net asset value of Iran ETFs