Reading a Nepali mutual fund factsheet without getting fooled by NAV

A reader asked recently how to "actually read" the monthly PDFs that Nepali capital firms publish for their mutual fund schemes. He had been comparing schemes by NAV — the fund with NAV of रू 14.20 must be doing better than the one at रू 11.80, right? — and wanted to know what the rest of the page meant.

The short answer is that NAV by itself tells you almost nothing. A factsheet is useful because of the seven other things on it. This post walks through a representative Nepali equity mutual fund factsheet section by section, names the questions each section answers, and points out the places where the Nepali context (closed-end dominance, NEPSE listing, SEBON disclosure rules) changes how you should read the same row of numbers compared with, say, an Indian or US factsheet.

A 30-second tour of the Nepali mutual fund universe

Before reading a factsheet, two structural facts about the market you are reading into:

• 42 schemes, mostly closed-end. As of 2026, roughly 35 closed-end and 7 open-end schemes are running, regulated by the Securities Board of Nepal (SEBON) under the Mutual Fund Regulations, 2067 (2010) and the Mutual Fund Directives, 2069. Closed-end funds have a fixed corpus, a fixed maturity (typically 7 to 10 years), and trade on NEPSE. Open-end funds (like NIBL Sahabhagita Fund — the first open-ended scheme in Nepal) issue and redeem units directly at NAV through the fund manager and are not listed on NEPSE.
• Par value is Rs 10. Every scheme issues units at a par value of NPR 10 at launch. So "NAV of रू 14.20" means the underlying portfolio is worth 1.42× the original Rs 10 contribution. A scheme launched 5 years ago at par with annualised growth of 7% would sit around NAV रू 14; one launched 3 years ago at the same growth rate would be near रू 12.25. The age difference alone explains most of what you see when you sort schemes by NAV.

The fund managers running these schemes are mostly the capital arms of commercial banks: Nabil Investment Banking, NMB Capital, Siddhartha Capital, NIBL Ace Capital, NIC Asia Capital, Kumari Capital, Global IME Capital, and a few others. Each manages multiple schemes — Siddhartha Capital alone runs Siddhartha Equity Fund (SEF), Siddhartha Investment Growth Scheme-2 (SIGS-2), and SIGS-3, with combined AUM of around NPR 3.5 billion.

The factsheet, section by section

A typical monthly factsheet from a Nepali capital firm has eight blocks. Here is what each one is for and what to look for.

1. Fund overview header

The top of the page lists the fund name, scheme type (closed-end / open-end), launch date, maturity date (closed-end only), fund manager, fund supervisor (the trustee), fund size (issued size at launch), and the as-of date.

What to do with it:

• Check the as-of date. If the factsheet is more than 60 days stale, the fund manager has fallen behind on disclosures. This sounds like a small thing but is one of the most reliable predictors of governance issues elsewhere.
• Note the maturity date for closed-end funds. The closer a closed-end fund is to maturity, the more its market price should converge to NAV. Buying a closed-end fund at a discount to NAV with 18 months to maturity is a different trade than buying the same fund 5 years from maturity.
• Match the fund manager and supervisor to your priors. Capital firms have different reputations for execution and disclosure. Read three months of factsheets from the same firm and you start to see who is consistent.

2. NAV box

Usually displayed prominently: NAV per unit, weekly change, since-inception change.

What to do with it:

• Don't compare absolute NAV across schemes — it is mostly a proxy for fund age, as covered above.
• Do compute since-inception CAGR. If a fund launched 4 years ago at par and is now at NAV रू 16.50, that is (16.50/10)^(1/4) − 1 ≈ 13.3% annualised before fees. The factsheet usually shows this number; if it doesn't, the calculation is one line.
• Compare CAGR to the NEPSE index over the same period. A fund manager who has matched NEPSE has earned their fee. One who has trailed NEPSE by 2 percentage points consistently is destroying value relative to a passive alternative — except Nepal does not yet have a true passive index fund, which is part of why active fees are tolerable here that wouldn't be elsewhere.

3. AUM (Assets Under Management)

The current value of all assets the scheme is managing, in NPR.

What to do with it:

• Check whether AUM has grown faster or slower than NAV × original fund size. AUM growing faster than NAV implies net inflows (good — investors are confident); AUM growing slower or shrinking implies redemptions or distributions (worth understanding why).
• For very small AUMs (under NPR 50 crore), be cautious. The fixed-cost component of running a scheme weighs more heavily, the expense ratio is structurally higher, and the manager has less room to scale into mid-cap positions without distorting prices.

4. Expense ratio / total annual expenses

This is the second-most-important number on the page after the holdings list. It typically breaks down into:

• Fund management fee — paid to the fund manager (the capital firm).
• Fund supervisor / trustee fee — paid to the bank or merchant banker acting as trustee.
• Depository / custodial fee — for holding the underlying securities.
• Registrar and transfer agent fee — for unit holder records.
• Audit, listing, and other regulatory fees.

What to do with it:

• Total it up. Most Nepali equity schemes land somewhere between 1.0% and 2.0% of AUM per year once everything is included. The Mutual Fund Regulations cap individual components, but the cumulative load is what matters to you.
• Project the drag. A 1% difference in expense ratio compounds to roughly 7% of cumulative return over 7 years (a typical closed-end maturity). On a starting investment of रू 1,00,000 at 12% gross, that is the difference between रू 2,21,000 and रू 2,07,000 at maturity. Not life-changing, but real.
• Be wary of expense ratios that are missing or vague. SEBON requires disclosure; an evasive expense section usually points to other gaps.

5. Top holdings

A list of the top 10 (sometimes top 15) equity holdings by weight, usually with company name, sector, number of units, and percentage of portfolio.

What to do with it:

• Look for concentration. If the top 10 holdings make up 70%+ of the portfolio, you're really buying 10 stocks plus a name on the front. If they make up 35–50%, the fund is genuinely diversified.
• Recognise the names. Most Nepali funds have heavy weights in the same large-cap pool: Nepal Life Insurance, Nabil Bank, NIC Asia Bank, Chilime Hydropower, Sarbottam Cement, Api Power, Siddhartha Premier Insurance, and similar. A fund whose top-10 looks identical to the NEPSE-50 is not adding much active value; one with genuine sector tilts (e.g., overweight microfinance during a credit-easing cycle) is at least making a call.
• Check overlap with funds you already hold. If you own Nabil Equity Fund and Nabil Flexi Cap Fund and they share 8 of 10 top holdings, you're paying two expense ratios for one bet. The overlap dramatically reduces the diversification you thought you had.

6. Sector allocation

A pie chart or bar list showing the percentage allocated to each NEPSE sector — typically Banking (commercial), Development banks, Finance, Microfinance, Life Insurance, Non-life Insurance, Hydropower, Hotels, Manufacturing, Trading, Others.

What to do with it:

• Compare to NEPSE's sector weights. A fund that is 60% banking when NEPSE is 35% banking has made a deliberate sector bet. You should be able to articulate whether you agree with that bet — if you can't, that's a signal that the scheme's mandate isn't matching your view.
• Watch for stale allocations. Some factsheets simply lift last quarter's allocation rather than updating monthly. If sector percentages have not changed at all between two consecutive factsheets — no rebalancing, no inflows, nothing — the manager is either not active or not disclosing.

7. Performance metrics (Standard Deviation, Beta, Sharpe ratio)

Included on better factsheets, often in a small table at the bottom.

• Standard deviation — how variable the fund's returns are. Higher means more month-to-month swing.
• Beta — sensitivity to NEPSE. Beta of 1.1 means the fund tends to move 10% more than NEPSE in either direction; beta of 0.85 means it moves less.
• Sharpe ratio — return per unit of risk. Higher is better; comparing the Sharpe of two equity schemes is more honest than comparing their raw returns.

What to do with it:

• Use these for cross-scheme comparison, not single-scheme judgment. A Sharpe of 0.8 means little in isolation. A Sharpe of 0.8 versus 0.5 for a similar peer scheme is a useful signal.
• Treat single-year metrics with skepticism. Beta and standard deviation computed over 12 months can swing wildly; the 3-year versions are more reliable.
• In a structurally young market like Nepal's, these metrics are noisier than they would be on a developed-market factsheet. Use them, but don't bet the decision on a 0.1 difference in Sharpe.

8. Dividend history

For closed-end funds especially, this matters. Funds distribute realised gains as cash dividends, and these are often the bulk of your cash return until maturity.

The instructive case: NIBL Sahabhagita Fund (open-ended) declared cash dividends of 8.25% in FY 2076/77, 50% in FY 2077/78, 7.2% in FY 2078/79, 4% in FY 2079/80, and 7% in FY 2081/82. The 50% dividend in 2077/78 reflected an extraordinary year for NEPSE; the 4% the following year reflected a weaker market. Reading dividend yield off a single year is misleading. Read the multi-year trail and you understand both the variability and the manager's discretion.

What to do with it:

• Compute average dividend yield over 3–5 years, not the latest one.
• Recognise dividends are usually realised gains, not earned income. Particularly for closed-end funds, a high "dividend" is often the manager harvesting a position to crystallise the gain — your unit value drops accordingly.
• Capital gains tax applies. Distributions to natural persons attract 5% TDS at source. Plan accordingly when projecting net returns.

Five reading mistakes to stop making

After two paragraphs of mechanics, the actionable part. The mistakes I see most:

1. Picking by absolute NAV. Already covered, but worth saying twice: NAV ≈ par value × cumulative return × time. Higher just means older.
2. Ignoring NEPSE discount on closed-end funds. Buying NEPSE-listed mutual fund units at a 15% discount to NAV is a different trade than buying at a 5% premium. The factsheet shows NAV; NEPSE shows the market price. Both numbers matter, and your platform usually shows you the second one without context.
3. Confusing "since inception return" with "what I will earn from here." A scheme up 80% since launch in 2018 is great for the people who bought at launch. You are not those people. What matters from your entry point forward is the manager's process, the AUM trajectory, the expense ratio, and the underlying holdings — not the eight years before you arrived.
4. Comparing closed-end and open-end schemes head to head. They are different products. Open-end gives you continuous redemption at NAV; closed-end gives you market-price liquidity that can dislocate from NAV. For a 5-year SIP-style commitment, an open-end fund is structurally cleaner; for an opportunistic discount-to-NAV trade, closed-end is the only option.
5. Reading one factsheet. A single factsheet is a snapshot. Read three to six months of consecutive factsheets for the same scheme and you start to see whether positions are turning over, whether the AUM is stable, whether disclosures are consistent. The first factsheet you read will mislead you; the sixth one will tell you most of what you need to know.

A reading routine that actually works

The factsheet exists to be read, not just collected. A pattern that holds up:

1. Once a quarter, pull the latest factsheet for every scheme you hold.
2. Compare it to the same scheme's factsheet from 6 months earlier (most fund managers archive these on their websites). Look at four numbers: NAV, AUM, expense ratio, top-3 holdings overlap.
3. Pull the NEPSE index level at both dates. Compute how the NAV moved versus NEPSE. If the fund underperformed NEPSE by more than 3 percentage points over six months without an obvious mandate-driven reason, ask why.
4. Look at concentration drift. If the top-3 holdings have grown from 18% to 28% of the portfolio over six months, the manager has consolidated positions. Sometimes that's conviction; sometimes it's reluctance to sell into weakness. The factsheet narrative section, if there is one, often tells you which.
5. Check whether dividend was declared and what its source was. A "12% dividend" funded entirely by realised gains in a flat-NEPSE quarter is the manager harvesting positions, not value being created.

This whole exercise takes 20 minutes per scheme per quarter. Do it for two years and your sense of which fund managers are honest with their factsheets becomes calibrated in a way no single-day comparison can match.

How this connects to the FD-vs-MF-vs-CIT decision

A factsheet is the operating manual for the mutual fund row of the FD vs Mutual Fund vs CIT post. The 10% expected return cited there is an average; whether you get there depends almost entirely on which scheme you pick and at what price. A scheme with a 1.0% expense ratio, low-concentration holdings, and a consistent dividend trail is doing very different work for you than a scheme with a 2.0% expense ratio, top-heavy holdings, and erratic distributions — even if both report similar one-year returns.

The factsheet is also where the tax assumptions in the FD-vs-MF-vs-CIT post get grounded — the 5% TDS on dividends and the 5% / 7.5% capital gains rates apply to your unit holdings exactly as the factsheet describes them.

For the broader question of where mutual funds sit in your overall plan, the beginners' financial independence roadmap covers the sequence — emergency fund first, retirement vehicles second, equity exposure once those are filled.

Tracking it in Kharchapatra

To make the factsheet routine sustainable, the bookkeeping has to be cheap:

• Each scheme is a separate investment account. Don't lump three mutual funds into "Mutual Fund — combined." You lose the ability to see which one is actually working for you.
• Use the factsheet's NAV as the monthly balance update. Even for closed-end funds you bought on NEPSE at a discount, marking to NAV (rather than market price) gives you a stable picture of the underlying portfolio's performance.
• Log dividend distributions as inflows to the same account, then transfer to a savings account if you want to spend them. This keeps the unit-balance logic clean and makes year-end yield computation trivial.
• Tag the buy transactions with the NEPSE price you actually paid. If you bought at a 12% discount to NAV, you want that purchase price preserved in the record so you can compute your actual return when you sell — not just the NAV-based return.
• Refresh quarterly, not daily. Mutual fund NAVs move weekly, but checking your dashboard every week trains you to react to noise. Once a quarter, when you pull the new factsheet, update the balance.

The dashboard's job is to make the long view easy. Daily NAV chasing is exactly the behaviour that turns a 10-year compounder into a 3-year exit at a loss.

What you actually need to decide

When you next look at a Nepali mutual fund factsheet, three questions in order:

1. Is the NAV growth, after expense ratio, beating NEPSE since I bought in? If yes, the manager is earning the fee. If consistently no, ask whether passive exposure (where it exists) would do better.
2. Are the top holdings and sector allocations consistent with the mandate I bought into? Drift is the leading indicator that a fund will surprise you.
3. Is the discount to NAV (for closed-end) wider or narrower than when I bought? This affects whether the right move at maturity is "ride to par" or "exit early."

A factsheet won't make every decision for you, but it answers those three questions in five minutes. That is the difference between investing in a mutual fund and just owning units in one.

Have a specific Nepali mutual fund factsheet you would like walked through, line by line — yours, your spouse's, your family's? Email parjanya57@gmail.com and I'll cover it as a worked example in a follow-up post.