The Securities and Exchange Organization (SEO) is amending articles of associations of two major exchange-traded funds managed by the government, the SEO chief said.
In a talk with state TV, Majid Eshqi said the changes would, among other things, seek to improve trade of the ETF units by drawing the market price of units closer to the net asset value (NAV) of the ETFs, Fars News Agency reported.
The government-affiliated ETFs were listed in the capital market in 2020 and hold stocks in giant state-run refineries and banks.
They were launched in line with the former government’s program to divest stakes to the public under privatization plans and secure funds for the deepening budget deficits.
In one ETF, government shares in three banks and two insurance companies were offered. The other ETF holds share in four refineries.
Eshqi expressed the hope that rewriting articles of associations of the two ETFs would overhaul the process they are traded in the equities market.
Investors normally complain that the ETF units are traded far below the NAVs.
NAV represents the net value of an entity and is calculated as the total value of the entity’s assets minus the total value of its liabilities. It is commonly used as a per-share value calculated for a mutual fund, ETF, or closed-end fund.
For an investment fund, NAV is calculated at the end of each trading day based on closing market prices of the portfolio's securities.
SEO’s plan of action pivots around three proposals.
First, the natural entities holding ETF units be allowed to have voting power on the function of ETFs. Presently, it is only the government officials who have the right to make decisions on ETFs, depriving individual investors of a say in the annual meetings.
Second, ETF portfolios be diversified, allowing managers to include other assets, namely gold, bonds, and the likes, in the portfolios.
By definition, ETFs contain all types of investments, including stocks, commodities, or bonds. The fact that ETFs in Iran hold only one type of asset is at odds with their nature as their portfolios usually comprises a sundry of assets.
Finally, it is suggested that the preferred equities be divested to private buyers to raise liquidity for the ETFs and further loosen the government’s tight grip on the funds.
