MUTUAL FUND

Mutual fund are subject to market

risk please read the offer document carefully before investing.

Its is not wise to put all eggs into one basket

.was probably in the minds of those who formed the first mutual fund.

Concept
A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal.

The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities.

The income earned through these investments and the capital

appreciation realized are shared by its unit holders in proportion to the number of units owned by them.
Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

HISTORY OF MUTUAL FUND

1964-1987 (Phase I)-Growth of Unit Trust of India

1987-1993 (Phase II)-Entry of Public Sector Fund

1993-1996 (Phase III)-Emergence of Private

Funds 1996-1999 (Phase IV)-Growth and SEBI Regulation 1999-2004 (Phase V)-Emergence of large & uniform Industry 2004 onwards (Phase VI)-Consolidation and Growth.

Growth in assets under management

Mutual Fund Operation Flow Chart

Organization of a Mutual Fund

Sponsor
Akin to the promoter of the company

Contribute min 40% of net worth of AMC

Posses sound financial record over five years period Establishes the Fund Gets it registered with the SEBI Forms a trust, & appoints Board of trustee

Trustees
Holds assets on behalf of unit holders intrust.

Two third of the trustees shall be independent persons

(not associated with the sponsor) Trustees ensure that the system, processes & personnel are in place Resolves unit holders GRIEVANCES Appoint AMC & Custodian, & ensure that all activities are accordance with the SEBI regulation.

Custodian
Holds the funds securities in safekeeping

Settles securities transaction for the fund

Collects interest & dividends paid on securities Records information on corporate actions Examples of custodian HDFC,CITY BANK, ABN AMRO,IIT CORPORATE SERVI

CES,SBI INDIA,STANDARD CHARTRED,SHCIL,DEUTS CHE BAN

Asset management company

Floats schemes & manages according to SEBI.

Can not undertake any other business activity, other than

portfolio management services 75% of unit holders can jointly terminate appointment of AMC At least 50% of independent directors Examples of AMC UTI,ICICI Prudential, Reliance, SBI, Canbank, ING Vysya, Stanchart, Taurus, HSBC

Distributor / Agents
Sell units on the behalf of the fund.

It can be bank, NBFCs, individuals

Registrar & Transfer Agent

Maintains records of unit holders accounts& transactions

Disburses & receives funds from unit holder transactions,

Prepares & distributes a/c settlements, Tax information, handles unit holder communication, Provides unit holder transaction services Examples of R & T Agents CAMS, KARVY, MCS Ltd, Datamatics, MN Dastoor & Co,

IIT Corporate Services, Computeronics, TCS, ICICI Infotec, UTI IS

Role of AMFI
Incorporated on 22 August, 1995.

Apex body of all the registered AMCs.

All AMCs are its member. Objective to maintain high ethical &professional standard. Provide certificate to Agents to sell MF Best practice guidelines. Code of ethics

Types of Mutual Fund Schemes

Wide variety of Mutual Fund Schemes exist to cater to the

needs such as financial position, risk tolerance and return expectations etc.
The figure in the next slide gives an overview into the

existing types of schemes in the Industry.

Types of Schemes
By Structure Open Ended Schemes-anytime entry/exit Close Ended Schemes-redemption after period of scheme is over. By Investment Objectives Equity Growth Schemes-Only in stocks-Long term (3 years or

more) Debt Income Schemes-only in fixed income securities (3-10) months Balance/Hybrid Schemes- Stocks + Fixed income securities Money Market Schemes-Short term money market Other Schemes Tax Saving Schemes-ELSS Special Schemes Index Schemes Sector Specific Schemes

Expenses of mutual fund

As per SEBI rule, expense ratio should be 2.5% for equity

and 2.25% for debt fund of the fund value. This expense includes: Management fee Group fee Performance fee Administrative fee

Frequently Used Terms

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Frequently Used Terms

Redemption Price

Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes.
Repurchase or Back-end Load

Is a charge collected by a scheme when it buys back the units from the unit holders.

Advantages of Mutual Funds

Professional Management Diversification Convenient Administration Return Potential Low Costs Liquidity Transparency Flexibility Choice of schemes Tax benefits Well regulated

DRAWBACKS OF MUTUAL FUNDS

No Guarantees

Fees and commissions

Taxes: Management risk

SOME OF THE KEY CHALLENGES

Over diversification

Uncertainty
Slow in decision making Tough competition

PROBLEMS OF MUTUAL FUND INDUSTRY

Problems related to structure

Problems related to the investors

Problems related to working Problems related to performance

Who are the issuers of MUTUAL FUND IN INDIA ?

Alliance Capital Mutual Fund

Birla Mutual Fund

Cholamandalam Mutual Fund Fidelity Equity Fund HDFC Mutual Funds ING Saving trust RELIANCE Capital SBI Mutual fund