Closed-end vs open-end mutual funds in Nepal: NAV, discount, and which to pick
Closed-end funds list on NEPSE and trade below NAV; open-end funds transact at NAV with the manager. The full split on pricing, loads, tax, and which to pick.
A friend who has bought into three NEPSE-listed mutual fund schemes asked me last week why his Mero Share value kept showing less than the NAV the fund posts. His Siddhartha scheme reported an NAV around Rs 9.69, but the price on his app was lower still, and he wanted to know whether he had been cheated.
Nobody cheated him. He owns a closed-end fund, and closed-end units in Nepal almost always trade below NAV on the secondary market. That single structural fact, plus its mirror image in open-end funds, decides how you buy, how you exit, what you pay in loads, and whether you can run a monthly SIP at all.
The one structural difference everything flows from
Two shapes of fund, one decision tree. Get this and the rest is detail.
A closed-end fund raises a fixed pool once, issues a fixed number of units, and runs to a set maturity, typically 5 to 10 years (Siddhartha's schemes are 10-year). Those units list on NEPSE. After the offering closes, the only way in or out is to buy or sell from another investor at a market price, and that price diverges from NAV (WealthNepal explainer). An open-end fund does the opposite: it issues and cancels units continuously, has no maturity, never lists on NEPSE, and you buy or redeem straight from the fund manager at the published NAV.
| Feature | Closed-end | Open-end |
|---|---|---|
| Units | Fixed number | Continuously issued and redeemed |
| Maturity | Fixed, usually 5 to 10 years | None |
| Where you transact | NEPSE secondary market, via broker | Directly with the fund manager |
| Price you pay | Market price (diverges from NAV) | NAV |
| NAV published | Weekly and monthly | Daily |
| Monthly SIP | Not possible | Yes |
| Listed on NEPSE | Yes, has a ticker | No |
If a fund shows up under a ticker on your NEPSE app, it is closed-end. If you can only find it on a fund-manager portal with a daily NAV, it is open-end. The deeper read on how NAV mechanics and discounts show up on a factsheet lives in reading a Nepali mutual fund factsheet.
How NAV is computed, and why publishing frequency differs
NAV is plain arithmetic. NAV per unit equals the total market value of the fund's assets, minus its liabilities and fees, divided by the total units outstanding (NIC Asia Capital). Every Nepali scheme launches its units at Rs 10 par, so an NAV of Rs 11.21 means the portfolio is worth 1.121x the original contribution, and an NAV of Rs 9.69 means it is below par.
The frequency is where the two shapes split. Closed-end managers publish NAV weekly and monthly, which is enough because you do not transact with them anyway, you transact on NEPSE. Open-end managers compute NAV daily, because that is the price every purchase and redemption settles at. NIC ASIA Dynamic Debt Fund states plainly that its NAV is calculated and updated on the manager's website by 11 A.M. on the next business day (NIC Asia Capital), which is daily next-day pricing in practice. Daily NAV is the machinery a SIP rides on, and it is the reason a monthly drip only works on open-end funds, the whole argument in how to start a SIP.
The closed-end discount, with honest numbers
This is the part that confused my friend, and it confuses most first-time closed-end buyers. The NEPSE price of a closed-end unit is set by market perception, not pinned to NAV (NIC Asia Capital materials confirm the price is not directly tied to NAV). The price usually sits below NAV, occasionally above.
A 2025 explainer illustrates the mechanic with a fund at NAV Rs 11 trading at a market price of Rs 9, roughly an 18% discount (Nepalytix). That Rs 11 / Rs 9 figure is an illustrative example, not a live quote. A dated February 2020 ShareSansar analysis found all 13 then-actively-traded closed-end schemes trading at a discount, the largest being NIBL Pragati Fund at Rs 1.66 below NAV and the smallest Laxmi Value Fund-1 at Rs 0.07 below, against an industry-average NAV of Rs 10.82; a separate example put NIC Asia Growth Fund at NAV Rs 17.9 versus a market price of Rs 12.6, about a 30% discount (ShareSansar, Feb 2020). Treat both of those as directional only. The 2020 numbers are six years stale, and live current per-fund discount percentages were not sourceable for this post, so check ShareSansar's "Mutual Fund & NAVs" table or NepseAlpha for today's exact spread before you buy.
Why does the discount exist? Four reasons stack up (Nepal Laws guide):
- No redemption before maturity. Units only exit through NEPSE, so demand sets the price.
- Thin secondary-market liquidity. Fewer buyers means sellers accept less.
- The time value of capital locked until the fund matures.
- Retail apathy toward fixed-duration vehicles and weak return prospects, pushing price below NAV.
The discount is not a free lunch. You buy below NAV, but you cannot redeem at NAV; you can only sell to the next investor, who also wants a discount. The gap closes near maturity, when the fund liquidates and pays out at NAV, which is the one moment a closed-end holder reliably captures the full NAV value.
What's actually on the market right now
Both shapes are well-populated. The Central Depository (CDSC) registry, the most authoritative count, shows 65 registered schemes: 48 closed-end, 14 open-end, and 3 preference (CDSC). Market trackers that count only actively traded schemes report fewer, in the 43 to 56 range, so treat 65 as the registered total and the smaller figures as live subsets.
Closed-end NAVs as of around Falgun 2082 (March 2026), all at Rs 10 par, sit mostly below par (Investopaper NAV table):
| Closed-end scheme | NAV (~Mar 2026) |
|---|---|
| Global IME Balance Fund-I | Rs 10.82 |
| Prabhu Smart Fund | Rs 11.30 |
| Sunrise Focused Equity Fund | Rs 9.93 |
| NMB Hybrid Fund L-II | Rs 9.79 |
| Siddhartha Investment Growth Scheme-2 | Rs 9.69 |
| NMB 50 | Rs 9.68 |
| Citizens Super 30 | Rs 9.68 |
| NIC Asia Growth Fund 2 | Rs 9.62 |
| Laxmi Value Fund-II | Rs 9.60 |
| Sanima Large Cap Fund | Rs 9.44 |
| Kumari Equity Fund | Rs 9.44 |
| NIBL Sahabhagita Fund (closed series) | Rs 9.41 |
| Siddhartha Equity Fund | Rs 9.38 |
| NIBL Growth Fund | Rs 9.17 |
Most of those NAVs are under the Rs 10 par, and the NEPSE price sits below the NAV again. Open-end NAVs, as of 3 June 2026 unless noted, run higher and you pay exactly NAV (ShareHub Nepal live NAV):
| Open-end scheme | NAV (3 Jun 2026) |
|---|---|
| Kumari Sunaulo Lagani Yojana | Rs 12.29 |
| Siddhartha Systematic Investment Scheme (SSIS) | Rs 11.21 |
| NMB Saral Bachat Fund-E | Rs 10.94 |
| Nabil Flexi Cap Fund | Rs 10.74 |
| Sanima Flexi Fund | Rs 10.62 |
| NIBL Sahabhagita Fund (open-end) | Rs 10.47 |
| Shubha Laxmi Kosh | Rs 10.46 |
| NIC Asia Dynamic Debt Fund | Rs 10.21 |
None of those open-end schemes list on NEPSE. The total industry has grown fast: AUM is estimated at roughly Rs 61 billion to Rs 73 billion by 2026, up from about Rs 13.6 billion in 2019, close to a 5x rise in under seven years (The Himalayan Times). Those AUM figures are approximate and vary by source.
How you actually buy each one
The transaction paths are completely different, and this is where new investors trip.
For a closed-end fund, you buy in one of two ways. At the IPO/NFO you subscribe during a limited window at the Rs 10 par face value, the same way you would apply for a share IPO. After listing, you buy and sell units on the NEPSE secondary market through a broker, using your demat and TMS, at whatever the market price is that day (Investopaper). That means a broker commission, a DP fee, and exposure to the discount.
For an open-end fund, you buy and redeem directly from the fund manager: at the fund-manager office, designated bank branches, authorised agents, the online portal, or a SIP standing instruction with ConnectIPS e-mandate auto-debit (Investopaper). No NEPSE, no broker, no discount. Common demat and Mero Share pitfalls that bite either route are in Mero Share and demat mistakes.
Loads, fees, and minimums on open-end funds
Open-end pricing is clean at NAV, but two scheme examples show the real leakage. Nepal has not charged an entry load since August 2009, so the entry load is nil on both. The exit load is where they differ.
| Item | NIC ASIA Dynamic Debt Fund | Siddhartha SSIS |
|---|---|---|
| Entry load | 0% | 0% |
| Exit load | 1.5% (under 6 mo), 1.25% (6 to 12), 1.00% (12 to 18), 0.75% (18 to 24), 0% after | 1.5% (under 1 year), 0% after |
| Minimum initial / SIP | Rs 1,000 (multiples of Rs 10) | Rs 1,000/month |
| Minimum redemption | 100 units | 100 units |
| Other fees | Management 1.5%, depository 0.2%, supervisory 0.1% of NAV | DP fee per CDS bylaws (~Rs 25/txn) |
Sources: NIC ASIA Dynamic Debt Fund page and Siddhartha SSIS FAQ. The exit load is the cost of liquidity. Hold past the first year or two and it disappears, which is why open-end funds reward staying put. Closed-end funds carry no exit load at all, since you exit through NEPSE rather than the manager, but the discount you eat on a NEPSE sale is often worse than any exit load.
Tax: dividends, capital gains, and the budget caveat
Tax on mutual funds in Nepal has two moving parts, and one genuine unresolved dispute.
On dividends, the withholding is 5% for a natural person and 15% for an entity (CA Sudip Paudel analysis). Practitioners treat the 5% as effectively final for individuals under the deemed-final-withholding provision, so it does not bundle into your salary return. There is a real conflict in the sources here: one tax-consultant reading argues that mutual-fund dividends received by a resident person are exempt, because Finance Bill 2078 brought mutual-fund income under exempt income, which would void the withholding. Sources disagree. In market practice, the 5% deduction at source is what investors actually see on the payout.
On capital gains for closed-end units sold on NEPSE, the FY 2082/83 treatment, the year people file by Ashoj 2083, matches listed shares: 5% for individuals holding over 365 days, 7.5% for under 365 days, 10% for entities, deducted at source by the broker or DP at settlement (Global IME Bank). Open-end redemptions follow the same individual split.
| Event | Individual rate (FY 2082/83) | Note |
|---|---|---|
| Cash dividend | 5% withholding | Treated as final by practitioners; exemption argument disputed |
| Capital gain, held over 365 days | 5% | Long-term |
| Capital gain, held under 365 days | 7.5% | Short-term |
| Capital gain, entity | 10% | At settlement |
Then the budget caveat. The FY 2083/84 budget presented on 29 May 2026 raised listed-share CGT to 7.5% long-term and 10% short-term and made share CGT a final tax with no separate settlement (Investopaper budget summary). But the budget speaks of "listed securities" generally and does not name mutual-fund units, so whether the new rates automatically reach MF unit sales is unconfirmed pending the published Finance Bill. The same budget doubled the 1% minimum-tax floor for individuals to Rs 10,00,000 (from Rs 5,00,000) and cut the top marginal rate from 39% to 29%, with the middle bands and couple thresholds still pending in the Finance Bill on budget day. None of those personal-tax changes are specific to mutual funds; the broader picture is in the FY 2083/84 budget walkthrough. The full closed-end CGT mechanics overlap with capital gains tax on shares.
Who runs these funds, and the seed-capital rule
Every scheme runs on a three-party structure under the SEBON Mutual Fund Regulation 2067 (2010): a Fund Sponsor that promotes and establishes the fund, a Fund Manager that designs and operates the schemes, and a Fund Supervisor for oversight (SEBON regulations). The supervisor needs at least 15 years of relevant experience, the fund manager's CEO needs 10 years, and the fund-manager paid-up capital should be at least Rs 2 billion. (The regulation PDF was machine-unreadable for this post, so the experience and capital figures come from secondary summaries citing it.)
The number worth knowing as an investor is the seed capital, the sponsor and manager's own money kept in the fund alongside yours. The long-standing rule fixed that seed at 15% of the scheme size. SEBON eased it in early 2026: a manager that meets experience and performance criteria, including at least three years of collective-investment experience, may now post as little as 10% or 5%, with 15% staying the default for managers who do not qualify (Insurance Khabar). A closed-end scheme also floats a large share of its corpus to the public, the rest held by the promoter and seed (the exact public-float minimum is set in the regulation, which was machine-unreadable for this post).
Which one should you actually pick
The choice is less about returns and more about how you want to transact. Two readers, two answers.
Pick open-end if you want to drip a fixed amount every month, want to redeem on demand at a known NAV, and do not want to think about a NEPSE discount or a maturity date. This is the right vehicle for a salaried Kathmandu investor running a Rs 1,000-a-month SIP, accepting an exit load only if you bail inside the first year or two. The track record here is real but modest: NIBL Sahabhagita (open-end) has distributed roughly 76.45% cumulative cash dividend to date and leads SIP funds on dividend history, NIC Asia Dynamic Debt Fund has paid about 9% on average, and Siddhartha Investment Growth Scheme-1 paid 60% cash over its life (Nepalese Investor dividend history). Read those carefully: some are lifetime cumulative totals, not annual yields.
Pick closed-end if you are comfortable buying a fixed-tenure pool on NEPSE, ideally at a discount to NAV, and holding it to maturity to capture the full NAV when the fund liquidates. You give up monthly investing and on-demand redemption, and you take liquidity risk, since selling early means accepting whatever discount the thin secondary market offers that day.
How they compare against an FD or CIT for the same rupee is the whole argument in FD vs mutual fund vs CIT, and how either stacks against parking the money in NEPSE or an FD at 25 is in NEPSE vs SIP vs FD.
What you actually need to know
Three takeaways:
- The structure is the whole story. Closed-end means fixed units, a fixed maturity, a NEPSE listing, weekly NAV, and a market price that trades below NAV. Open-end means continuous units, no maturity, no listing, daily NAV, and you transact at exactly NAV with the manager. Everything else, loads, SIP eligibility, how you exit, follows from that.
- A discount is not a bargain you can bank. Closed-end units sit below NAV because the capital is locked and the secondary market is thin. You only reliably capture full NAV at maturity. Open-end never trades at a discount, but charges an exit load if you redeem inside the first year or two.
- Tax has one settled split and one open question. Individuals see 5% on dividends and 5%/7.5% on capital gains for FY 2082/83. Whether the FY 2083/84 budget's new 7.5%/10% final share-CGT reaches mutual-fund units is unconfirmed until the Finance Bill is published, so do not assume it does yet.
Stuck on whether a specific scheme is closed-end or open-end, or how to value a discounted NEPSE holding? Email parjanya57@gmail.com and I'll work through it.
This post is part of the Nepal Money Basics guide — the investing section.