Professional Documents
Culture Documents
Origin
The origin of the Indian mutual funds industry dates back to 1963
when the Unit Trust of India (UTI) came into existence at the
initiative of the Government of India and the Reserve Bank of
India. Since then the mutual funds sector remained the sole
fiefdom of UTI till 1987 when a slew of non-UTI, public sector
mutual funds were set up by nationalized banks and life insurance
companies.
The year 1993 saw sweeping changes being introduced in the
mutual fund industry with private sector fund houses making their
debut and the laying down of comprehensive mutual fund
regulations. Over the years, the Indian mutual funds industry has
witnessed an exponential growth riding piggyback on a booming
economy and the arrival of a horde of international fund houses.
Concept
“Mutual fund is vehicle that enables a number of investors to
pool their money and have it jointly managed by a
professional money manager.”
Or
ganisation of a Mutual Fund
Mutual funds
Mutual fund is vehicle that enables a number of investors to pool
their money and have it jointly managed by a professional money
manager
Sponsor
Sponsor is the person who acting alone or in combination with
another body corporate establishes a mutual fund. The Sponsor is
not responsible or liable for any loss or shortfall resulting from the
operation of the Schemes beyond the initial contribution made by it
towards setting up of the Mutual Fund.
Trustee
Trustee is usually a company (corporate body) or a Board of
Trustees (body of individuals). The main responsibility of the
Trustee is to safeguard the interest of the unit holders and ensure
that the AMC functions in the interest of investors and in
accordance with the Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996.
Asset Management Company (AMC)
The AMC is appointed by the Trustee as the Investment Manager
of the Mutual Fund. At least 50% of the directors of the AMC are
independent directors who are not associated with the Sponsor in
any manner. The AMC must have a net worth of at least 10 crores
at all times.
Transfer Agent
The AMC if so authorised by the Trust Deed appoints the Registrar
and Transfer Agent to the Mutual Fund. The Registrar processes
the application form, redemption requests and dispatches account
statements to the unit holders. The Registrar and Transfer agent
also handles communications with investors and updates investor
records.
History of the Indian Mutual Fund
The mutual fund industry in India started in 1963 with the
formation of Unit Trust of India, at the initiative of the
Government of India and Reserve Bank the. The history of mutual
funds in India can be broadly divided into four distinct phases:
First Phase – 1964-87: Unit Trust of India (UTI) was
established on 1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under the Regulatory
and administrative control of the Reserve Bank of India. In 1978
UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. At the end of 1988 UTI
had Rs.6, 700 crores of assets under management.
Second Phase – 1987-1993 (Public Sector Funds):
SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Punjab National Bank
Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89),
Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92).
LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990. At the end of 1993, the
mutual fund industry had assets under management of Rs 47000
crores.
Third Phase – 1993-2003 (Private Sector Funds):
With the entry of private sector funds in 1993, a new era started
in the Indian mutual fund industry, giving the Indian investors a
wider choice of fund families. Also, 1993 was the year in which
the first Mutual Fund Regulations came into being, under which
all mutual funds, except UTI were to be registered and
governed. The 1993 SEBI (Mutual Fund) Regulations were
substituted by a more comprehensive and revised Mutual
Fund Regulations in 1996. The industry now functions under
the SEBI (Mutual Fund) Regulations 1996. The number of
mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of
January 2003, there were 33 mutual funds total assets of Rs. 1,
21,805 crores.
Fourth Phase – since February 2003: In February
2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities.
One is the Specified Undertaking of the Unit Trust of India with
assets under management of Rs.29, 835 crores as at the end of
January 2003.
The second is the UTI Mutual Fund Ltd, sponsored by SBI,
PNB, BOB and LIC. With the bifurcation of the UTI which had
in March 2000 more than Rs.76, 000 crores of assets under
management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004,
there were 29 funds, which manage assets of Rs.153108 crores
under 421 schemes.
The graph indicates the growth of assets over the years.
Growth in Assets under Management
Characteristics of a Mutual Fund
The following are the characteristics of the mutual funds:-
A mutual fund belongs to the investors who have pooled their
funds. The ownership of the mutual fund is in the hands of the
investors.
Investment professionals and other service providers, who
earn a fee for their services, from the fund, manage the mutual
fund.
The pool of funds is invested in a portfolio of marketable
investments. The value of the portfolio is updated every day.
The investors share in the fund is denominated by “units”.
The value of the units changes with change in the portfolio’s value,
every day. The value of one unit of investment is called as the Net
Asset Value or NAV.
The investment portfolio of the mutual fund is created
according to the stated investment objectives of the fund.
Case Study
On
Introduction
Reliance Mutual Fund (RMF) is one of India’s leading
Mutual Funds, with Assets under Management of Rs.
36,927 crores as on 31st December 2006 and an investor
base of over 2.8 million.
Reliance Mutual Fund, a part of the Reliance - Anil
Dhirubhai Ambani Group, is one of the fastest growing
mutual funds in the country. It offers investors a well-
rounded portfolio of products to meet varying investor
requirements and has presence in 95 cities across the
country.Reliance Mutual Fund constantly endeavors to
launch innovative products and customer service initiatives
to increase value to investors.
Reliance Mutual Fund schemes are managed by Reliance
Capital Asset Management Ltd., a wholly owned subsidiary
of Reliance Capital Ltd. Reliance Capital Ltd. is one of
India’s leading and fastest growing private sector financial
services companies, and ranks among the top 3 private
sector financial services and banking companies, in terms
of net worth. Reliance Capital Ltd. has interests in asset
management, life and general insurance, private equity and
proprietary investments, stock broking and other financial
services. Reliance Mutual Fund (RMF) has been
established as a trust under the Indian Trusts Act, 1882
with Reliance Capital Limited (RCL), as the
Settler/Sponsor and Reliance Capital Trustee Co. Limited
(RCTCL), as the Trustee.
It has been registered with the Securities & Exchange
Board of India (SEBI) on dated June 30, 1995. The name of
Reliance Capital Mutual Fund has been changed to
Reliance Mutual Fund effective 11th. March 2004.
REGISTERED OFFICE Reliance Capital Asset Management Limited
EO1, Reliance Greens, Village Motikhavdi,
P.O. Digvijaygram,
District Jamnagar - 361 140.
Gujarat.
Tel No.: 0288 3011556.
Fax No.: 02880 3011598.
Open-Ended Funds
All mutual funds fall into one of two broad categories:
open-end funds and closed-end funds. Most mutual funds
are open-end. The reason why these funds are called "open-
end" is because there is no limit to the number of new
shares that they can issue. New and existing shareholders
may add as much money to the fund as they want and the
fund will simply issue new shares to them. Open-end funds
also redeem, or buy back, shares from shareholders. In
order to determine the value of a share in an open-end fund
at any time, a number called the Net Asset Value
(described below) is used. You purchase shares in open-end
mutual funds from the mutual fund itself or one of its
agents; they are not traded on exchanges.
Closed-End Funds
By Investments
The aim of growth funds is to
provide capital appreciation over the
medium to long term. Such schemes
normally invest a majority of their corpus in equities. Growth
schemes are ideal for investors who have a long-term outlook
and are seeking growth over a period of time. The primary
investment objective of the Scheme is to achieve long-term
growth of capital by investment in equity and equity related
securities through a research based investment approach.
Other Schemes
These schemes offer
tax rebates to the
investors under specific
provisions of the Indian Income Tax laws, as the
Government offers tax incentives for investment
in specified avenues.Investments made in Equity
Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction under Section
80c of the Indian Income Tax Act, 1961.
Investment objective
Thank you
Major Mutual Fund Companies in India
.ABN AMRO Mutual Fund:- April 15, 2004
Birla Sun Life Mutual Fund:-
Bank of Baroda Mutual Fund:- October 30, 1992
HDFC Mutual Fund:- June 30, 2000
HSBC Mutual Fund:- May 27, 2002
ING Vysya Mutual Fund:- February 11, 1999
Prudential ICICI Mutual Fund:- October 13, 1993
State Bank of India Mutual Fund:-
Tata Mutual Fund:-
Kotak Mahindra Mutual Fund:- December 1998
Unit Trust of India Mutual Fund:- Jan 14, 2003
Reliance Mutual Fund: - March 11, 2004.
Standard Chartered Mutual Fund:- March 13, 2000
Franklin Templeton India Mutual Fund:-
Morgan Stanley Mutual Fund:-
Alliance Capital Mutual Fund:- December 30, 1994