Judging a Nepali scheme

Nepal has dozens of listed schemes and almost no independent analysis of them. The disclosures you need are published — most people simply never open them.

The four numbers

Worked: is the discount the bargain it looks like?

A scheme has NAV Rs 12.40, trades at Rs 9.90, and matures in three years.

• Discount = (9.90 − 12.40) ÷ 12.40 = −20.2%.
• If NAV stays flat and the discount closes entirely at maturity, you receive Rs 12.40 for Rs 9.90 — a gain of 25.3% over three years.
• As an annual rate: 1.253^(1÷3) − 1 = 7.8% a year, before any change in NAV.
• That is the return from the discount alone. Whether the fund is any good is a separate question, answered by the NAV history.

Reading the NAV history properly

A scheme up 18% in a year sounds good. If the NEPSE index rose 26% over the same months, the manager destroyed value — you would have done better in an index of the same shares, without the expense ratio.

1. 1Take the NAV at the start and end of the same period you measure the index over.
2. 2Compute both as percentages. The difference is the manager's contribution, positive or negative.
3. 3Do it over at least three periods. One good year is noise.

The concentration trap

Open the portfolio disclosure and compare it with what you already hold. Nepali schemes are heavily weighted to banking and finance, because that is most of NEPSE by market capitalisation. If your direct holdings are also banks, buying the scheme is not diversification — it is the same bet, with an expense ratio attached.

Annualise the return on a discount→