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Mutual Funds
Mutual Funds
A Mutual Fund is a trust that pools the savings of a number of investors who share a common investment objective IN turn buy assets
LEGAL STRUCTURE
FUND SPONSPOR/SETTLOR KOTAK MAHINDRA FINANCE LTD.
TRUST KOTAK MAHINDRA MUTUAL FUND INVESTMENT MANAGER & ADVISOR KOTAK MAHINDRA ASSET MANAGEMENT CO. LTD.
Contd
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Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
LEGAL STRUCTURE
INVESTMENT MANAGER & ADVISOR KOTAK MAHINDRA ASSET MANAGEMENT CO. LTD.
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FUND MANAGEMENT
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MUTUAL FUNDS
OPEN ENDED OPEN FOR ALL THE YEAR MIN SUBS AMT 50CR NO DURATION REFUNDED IF MIN SUBS NOT ACHIEVED REPURCHASED ANY TIME REDEEMED AT NAV & LOAD FACTOR RANGES (4% TO 6%) AS REPURCHSED SO NOT LISTED AT STOCK EX TRADED AS PERMITTED LOT DIVID MAY /MAY NOT SWITCHOVER ALLOWED 21-6
CLOSE ENDED OPEN FOR FIXED PERIOD MIN SUBS AMT 20CR DURATION (5TO7 YEARS) REFUNDED IF MIN AMT NOT ACHIEVED MAY BE REPURCHASED (AFTER 2 TO 3 YRS) REDEMPTION SPECIFIED & DONE AT NAV - SERVICE CHARGE LISTED AT STOCK EX DIVID MAY/MAY NOT BE SWITCHOVER Prof. A.K. .Mishra All rights reserved. ALLOWED Copyright 2002 by
Park
Profile Select
appropriate MF scheme, based on risk return requirement of equity and debt regularly/with flexibility
benefits
Mix
Invest
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INVESTMENT OPTIONS
Instrument
Bank Deposits ICD s Call (thro PD s) T-Bills Mutual Funds Liquid Bond Serial Overnight to 1 month 1 month months 12 8% to 9.5% 9% 10.5% 9% - 10% No Low Credit No price risk High High High
Tenure
7 days to 1 yr. <180 days Overnight <12 months
Pre-Tax Returns
6% - 12% 9% - 11% 6.5% - 9% 7% - 9%
Risk
Low Medium Low Price Risk
Liquidity
Possible by breaking FD at cost No secondary mkt. Routed thro PD s High
Over 1 year
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MUTUAL FUNDS
STRUCTURAL ISSUES (MUTUAL FUNDS)
MUTUAL FUND (REGISTERED WITH SEBI) MEANS: A FUND ESTABLISHED IN THE FORM OF TRUST
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MUTUAL FUNDS
STRUCTURAL ISSUES (MUTUAL FUNDS)
BY A SPONSOR
BODY CORPORATE WHO ACTING ALONE OR IN COMBINATION WITH ANOTHER BODY CORPORATE FLOATS THE IDEA OF SETTING UP OF MUTUAL FUND ESTABLISHES MUTUAL FUND IN FORM OF TRUST TRUST DEED EXECUTED WITH BOARD OF TRUSTEES REGISTERS IT WITH SEBI 40% CONTRIBUTION TO AMC
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MUTUAL FUNDS
FOR INVESTING IN SECURITIES APPLICATION FEES:5000; REGISTRATION FEES:10 LACS; ANNUAL FEES : 1 LAC
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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MUTUAL FUNDS
STRUCTURAL ISSUES(MUTUAL FUND TRUST)
MF TO BE CONSTITUTED IN FORM OF MF TRUST MANAGED BY A BOARD OF TRUSTES IN WHOSE FAVOUR TRUST DEED IS EXECUTED BY SPONSORS
50% MEMBERS NOT AFFILIATED WITH SPONSORS CONTROLS ALL CAPITAL PROPERTY OF MF SCHEMES/ HOLDS THEM IN TRUST FOR HOLDERS
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MUTUAL FUNDS
STRUCTURAL ISSUES(MUTUAL FUND TRUST) APPOINTS AMCs ENSURES SCHEMES FLOATED & MANAGED BY AMC ARE IN ACCORDANCE WITH TRUST DEED
POWER TO OBTAIN REPORT/DISMISS AMC AN AMC NOT TO ACT AS TRUSTEE OF ANY MF APPOINT CUSTODIAN &SUPERVISE ITS ACTIVITIES
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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MUTUAL FUNDS
STRUCTURAL ISSUES (MUTUAL FUND TRUST LIST) ALLIANZ CAPITAL & MGT SERVICES LTD ANZ GRINDLAYS BANK TIMES MUTUAL FUNDS UNIT TRUST OF INDIA VLS FINANCE LTD. KOTAK MAHINDRA FINANCE LTD PRUDENTIAL CAPITAL MARKETS LTD. SBI FUNDS MANAGEMENT LTD CEAT MF & ASSET MANAGEMENT COMPANY LTD.
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Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
MUTUAL FUNDS
STRUCTURAL ISSUES (AMC)
MFs OPERATED BY AMCs -APPTD BY TRUSTEES AMCs & TRUSTEES TWO SEPARATE LEGAL
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MUTUAL FUNDS
STRUCTURAL ISSUES (AMC)
AMCs MIN NW 5 CR (40% CONTRIB BY SPOSORS) 50% MEMBERS FROM OUTSIDE CANT ACQUIRE OUTSIDE THE SCHEME PROPERTY DISCLOSE REPURCHASE PRICE/NAV OF SCHEMES
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MUTUAL FUNDS
STRUCTURAL ISSUES (AMC LIST) 20TH CENTURY AMC LTD APPLE ASSET MGT LTD. BOI AMC LTD. CREDIT CAPITAL AMC LTD. GIC AMC LTD. ICICI AMC LTD. ITC PIONEER AMC LTD. MORGAN STANLY AM INDIA LTD. PNB AMC LTD.
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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MUTUAL FUNDS
STRUCTURAL ISSUES (INVESTMENT MIX) EQUITY SHARES/EQUITY RELATED INSTRTS (CDs)/ DEBT INSTRUMENTS (NCDs, PSBONDS,GOVT SECT)/MONEY MARKET INSTRTS(TBs, CPs & BILLS) 5% CAP FROM ONE SCHEME IN ONE COS SHARE 10% CAP FROM ALL SCHEMES IN ONE COS SHARE 15%CAP FROM ALL SCHEMES IN ONE INDUSTRY
DEBT 5-20% 60-70% 40-50% MONEY MKT 0-10% 0-15% 0-10%
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
TYPICAL ASSET MIX SCHEME EQUITY GROWTH 70-90% INCOME 20-30% BALANCED 40-60%
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NAV=
MARKET PRICE: IN CASE OF CLOSE ENDED REPURCHASE/REISSUE PRICE: OPEN ENDED DISCOUNT RATE OF RETURN= NAV AT END-NAV AT BEGINNING +
DIVIDEND PAID NAV AT BEGINNING
INITIAL ISSUE EXP (6% OF FUND RAISED)HIDDEN RECURRING EXP (3% MAX OF NET ASSETS) OTHER THAN INITIAL ISSUE EXP/ INCLUDES TRUSTEESHIP FEES /INCLUDES INVST MGT & ADVISORY FEE OF AMC (1.25% UPTO RS 100 CR & 1% OVER 100 CR)
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AMC CHARGE FOR ISSUE/RECURRING COST(6%) IN OPEN END SCHEME DIFF BETWEEN PURCHASE & SALE PRICE NOT TO EXCEED 7% OF SALE PRICE
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IF VALUE OF EQUITY IS DOUBLED, NAV SHIFTS NAV=(RS 12 MILL EQ + RS 4 MILL DEBT)- 2 MILL LIAB AS DEBT = 0.875
16 MILL UNITS IN TRUST
IF VALUE OF EQUITY IS HALFED THEN THE NEW NAV IS NAV=(RS 3 MILL EQ + RS 4 MILL DEBT)- 2 MILL LIAB AS DEBT = 0.3125
16 MILL UNITS IN TRUST
IN ABOVE, FUND SHOULD SWITCH FROM AGGRESSIVE TO DEFENSIVE INVEST TO AVOID RAPID EROSION OF NAV INVEST IN DEBT INSTRTS MAY BE ONE SOLUTION
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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BID PRICE (REPURCHASE PRICE) WILL BE RS 20.00 PER UNIT DIFFRENCE BETWEEN OFFER & BID PRICE IS 4% i.e. 80 PAISE IS CALLED SPREAD PAID TO FUND THERE IS A TWO WAY QUOTE PROVIDED BY IN OPEN FUND
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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KEY FINANCIALS MARS, PVT SECTOR MF LAUNCHED A GROWTH SCHEME WITH AN INITIAL TARGET OF Rs 100 CR. DEPLOYMENT OF FUNDS IS TO CONFIRM THE FOLLOWING COMPOSITION EQUITY 70%, DEBT 25% MONEY MARKET 5% INITIAL EXPENSES 4% DEBT COMPONENT INVESTED EQUALLY IN AAA & AA RATED INSTRUMENTS AT 18% & 20% RESPECTIVELY EQUITY PORTION INVESTED IN SENSEX SCRIPS AV. YIELD ON MONEY MARKET COMPONENT WAS 8% SENSEX WAS AT 3800 & AT TIME OF INVEST IS AT 2900 AFTER ONE YEAR DEBT & MONEY MKT INSTRTS VALUED AT COST RECURRING EXP MET OUT OF INCOME EARNED ON DEBT & MONEY MKT INSTRTS (assume 3% on size of fund)
COMPUTE NAV & SALE PRICE IF FRONT LOAD FACTOR IS 5%
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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FEW EVIDENCES SHRIRAM ASSET MGT CO FINED (JUN 96) MORGAN STANLEY FINED (2/6/97)
RESORTING TO SHORT SALES PRICE RIGGING IN BHEL SCRIPS RENDERING PORTFOLIO MGT SERV TO GROUPS
CANSTAR UNABLE TO PURCHASE AT PROMISED NAV LIC MF HAD TO PURCHASE AT PROMISED NAV & BOOK THE LOSS TO AMC
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Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
No. o
chemes
98 50 31 17
28 01 10 17
32 02 12 18
158 53 53 52
Schemes giving -ve returns on annualised basis Schemes giving single digit annualised returns Schemes giving double digit annualised returns Source: Business Today
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10,285 3,172
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PRODUCT MARKETING
OUT SOURCING
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FUND MANAGEMENT
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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PRODUCT DESIGN DID LITTLE TO INNOVATE WITH INNOVATION 70% SCHEMES CLOSE END WITH POOR RETURNS UTI STILL CONTINUES WITH PLAIN VANILLAS INNOVATION ONLY IN OPEN END SCHEMEDS TIME TO DESIGN SECTOR, LOCATION BASED MFs
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PRODUCT MARKETING COST & ETHICS ARE TWO IMPORATNT FACTORS UPFRONT COST BORNE BY INVESTOR OR AMC UTI CANT AGGRESSIVELY MARKET ITS PRODUCT MORGAN STANLEY MADE MFs AS IPOs & ALL NUANCES OF IPOs WERE BROUGHT IN
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FUND MANAGEMENT NON-QUALIFIED, UNPROFESSNL FUND MANAGERS LOOK MFs AS ANOTHER EQUITY PRODUCT IGNORE ASSET ALLOCATION, PORTFOLIO, TURNOVER & COST NO QICK ASSET REALLOCATION ON TIME DONT INCLUDE HIGH LIQUID BLUE CHIP STOCKS NOT BALANCING RISK RETURN EXPECTATION OF INVESTORS
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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FUND MANAGEMENT- SUGGESTED MODEL PROTECT CAPITAL FROM EROSION ALTERNATIVELY GUARANTEE CAPITAL SAFETY POSSESS EXCELLLENT RESEARCH CAPABILITIES TO ENSURE MARKET TIMING INVESTMENT STRATEGY FORMULATION FOLLOW APPROPRIATE ASSET ALLOCATION MODEL SUITING FUNDS OBJECTIVE QUICKLY RESTRURE ASSET ALOCATION ON NEED ENSURE QUALITY OF ASSETS BE IT EQTY OR DEBT ENSURE ECONOMICAL COST OF OPERATIONS BE IT MANAGEMENT FEES OR OTHER EXPENSES
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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OUTSOURCING NEW CONCEPT THAN TO DO THINGS IN HOUSE ENDORSED AS A GREAT COST CUTTING MEASURE CONVERTS FIXED COSTS TO VARIABLE COSTS ABROAD OUTSOURCING 100% FROM PRODUCT DESIGN TO INVESTOR SERVICING YET TO COME IN INDIAN FUND MANAGEMENT ONE AREA MAY BE DISTRIBUTION NETWORK
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CUSTOMER FOCUS SCANT ATTENTION TO INVESTORS SERVICING IGNORING INVESTORS EDUCATION NOT INCLINED TOWARDS TRANSPARENCY NON DISCLOSURE OF PORTFOLIO LACK LUSTER SHOW ON RETURNS FRONT UNIT HOLDERS NOT TREATED AS CUSTOMERS GOOD SERVICE ATTRACTS MULTIPLE CUSTOMERS MORALE TREAT HIM LIKE CUSTOMER & INVEST IN TECNOLOGY TO REACH HIM FAR & WIDE LESSONS TO LEARN FROM Pvt SECTOR MFs
Copyright 2002 by Prof. A.K. .Mishra All rights reserved.
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