MUTUAL FUNDS

Financial Intermediaries
“Don’t put all your eggs in one
basket”
 Benefits

• Professional management
• Diversification
• Low cost
• Transparency
• Variety
• The first mutual funds of the world “The
Massachusetts investors trust” was
launched in Boston, USA in 1924.

• In India it began with the setting up of the

Unit Trust of India in 1964 by the
Government of India.
• In 1987 public sector banks and insurance
companies were permitted to set up
mutual funds.

• Private sector made its debut in the mutual

funds industry in 1993.
Structure of Indian Mutual Funds

• Sponsor can be any person, acting

alone or in a combination with another
body corporate who establishes the
mutual funds.
• The board of trustees who manages a
mutual fund and the sponsor executes the
trust deeds
• Asset Management Company is
appointed by the trustees to float the
schemes and manage the funds raised by
selling units under the scheme

• Custodian who carry outs the activity of

safekeeping the securities or participating
in any clearing system.
Types of Mutual Funds
 Investment objectives

• Growth funds / Equity funds

• Income / Debt funds
• Balanced funds
• Money market funds
• Gilt funds
• International funds
 By duration

• Open-ended funds
• Close-ended funds
• Interval funds
 By entry / exit charges

• Load funds
• No-load funds
 Others

• Tax saving funds

• Index funds
• Sector funds
• Special purpose funds
• Retirement pension funds
• Insurance funds
 Frequently used terms
• Net Asset value is the market value of
the assets of the scheme minus its
liabilities.

• Sale Price is the price you pay when you

invest in a scheme. It may include a sales
load.
• Repurchase Price is the price at which
a close-ended scheme repurchases its
units. This is also called Bid Price.

• Redemption Price is the price at which

open-ended schemes repurchase their
units and close-ended schemes redeem
their units on maturity.
• Sales Load is a charge collected by a
scheme when it sells the units.

• Repurchase or ‘Back-end' Load is a

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