“An estimated 3,700 trillion rials [$14.2b] is managed by fixed income funds while equity funds hold 620 trillion rials [$2.4b],” Meisam Fadaee, the SEO deputy for supervising financial institutions was quoted as saying by the SEO News Agency.
Funds operated by market making companies manage about 920 trillion rials ($3.4b), which Fadaee said was 44% higher than in later December.
Market makers act as wholesalers buying and selling securities to balance the market and help keep it functioning. Market making gained traction after Iran's equity market took a drubbing under a prolonged sell-off last summer.
Commodity-based funds manage 26 trillion rials. Commodity funds invest in precious metals, such as gold and silver, energy resources such as oil and natural gas, and agricultural goods such as wheat. Such funds are normally backed by gold in Iran.
According to Fadaee, fixed income funds have allocated a bigger portion of their portfolios to stocks after the regulator obliged them in March.
“These funds invested 140 trillion rials in shares in the past five months,” he said, adding that the funds generated 87.8 trillion rials in profit in the period. With the obvious aim of propping up the sluggish share market and boost demand, fixed income investment funds have been obliged to earmark a bigger portion of their portfolios to stocks and investment in bonds.
According to SEO rules fixed income investment funds are obliged to invest at least 15% of their resources to buy stocks, stocks rights, option contracts and commodity-based certificates of deposits.
The funds, however, are not allowed to invest more than 25% of their resources in shares. Investment funds are obliged to raise their investment in shares to the set minimum in phases, the last phase ending in fiscal 2022 in March.
The funds are also banned from investing more than 30% of their assets in bonds. Prior to this, fixed income investment funds along with banks were the main buyers of government bonds, issued in big amounts to fund budget deficits.
In a similar decision, SEO approved regulations that allows banks to acquire stakes in investment banks and market making companies. The Central Bank of Iran annulled all previous regulations that banned bank loans to brokerages, investment funds and investment holding companies to invest in shares.
According to Fadaee, 300 investment funds operate in the stock market with about 10.2 million investors who have opted for indirect investment in the capital market.