Professional Documents
Culture Documents
A Mutual Fund Is A Professionally-managed Firm Of Collective Investments That Pools Money From Many Investors And Invest It In Stocks, Bonds Etc.
Transparency
Well Regulated- AMFI
The value of one unit of investment is called net asset value (NAV). The investment portfolio of the mutual fund is created according to the stated investment objectives of the Fund.
To provide an opportunity for lower income groups to acquire without much difficulty, property in the form of shares.
To manage investors portfolio that provides regular income, growth, safety, liquidity, tax advantage, professional management and diversification.
Professional Management
Diversification of portfolio Convenient Administration Return Potential Low Costs Liquidity for some schemes Transparency
Flexibility
Choice of schemes Tax benefits Well regulated
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Two methods Lump sum or one time payment method Systematic investment plan (SIP)
NAV is low.
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SEBI regulations also define that a sponsor must contribute at least 40% to the net worth of the asset management company.
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Trustees:
Created through a document called the Trust Deed that is executed by the Fund Sponsor and registered with SEBI.
The Trust i.e. the mutual fund may be managed by a Board of Trustees i.e. a body of individuals or a Trust Company i.e. a corporate body.
Protector of unit holders interests. 2/3 of the trustees shall be independent persons and shall not be associated with the sponsors.
Approve each of the schemes floated by the AMC. The right to request any necessary information from the AMC.
May take corrective action if they believe that the conduct of the fund's business is not in accordance with SEBI Regulations.
Have the right to dismiss the AMC Ensure that, any shortfall in net worth of the AMC is made up.
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CUSTODIANS OF MUTUAL FUNDS:A custodians role is safe keeping of physical securities and also keeping a tab on the corporate actions like rights, bonus and dividends declared by the companies in which the fund has invested. The Custodian is appointed by the Board of Trustees. Mutual funds run by the subsidiaries of the nationalized banks have their respective sponsor banks as custodians like Canara bank, SBI, PNB, etc. Foreign banks with higher degree of automation in handling the securities have assumed the role of custodians for mutual funds.
RESPONSIBILITY OF CUSTODIANS:Receipt and delivery of securities Holding of securities. Collecting income Holding and processing cost Corporate actions etc
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Association of Mutual Funds in India (AMFI) was incorporated on 22nd August 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. AMFI has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.
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Promote the interests of the mutual funds and unit holders and interact with regulators- SEBI/RBI/Govt./Regulators.
To set and maintain ethical, commercial and professional standards in the industry and to recommend and promote best business practices and code of conduct to be followed To increase public awareness and understanding of the concept and working of mutual funds in the country To undertake investor awareness programmes and to disseminate information on the mutual fund industry. To develop a cadre of well trained distributors and to implement a programme of training and certification for all intermediaries and others engaged in the industry.
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All mutual funds are regulated by the Securities and Exchanges Board of India (SEBI). It issued detailed guidelines for their setting up and operation on 20th January, 1993.
The following are the highlights of SEBI regulations:
Mutual funds are to be established in the form of a trust under the Indian Trusts Act, 1882 and operated by separate asset management companies (AMC) They have to set up a Board of Trustees and Trustee Companies and constitute their Board of Directors. The minimum net worth of AMCs is stipulated at Rs. 5 crore(later increased to Rs. 10 crore). The AMCs and trustees are to be two separate legal entities and an arms length relationship must be maintained between the two.
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By Structure
Open-Ended anytime enter/exit Close-Ended Schemes redemption after period of scheme is
over, listed.
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Equity Diversified Schemes- Invest in equity Sectors Schemes Focus on particular sectors
Debt Schemes Invest in medium and short term debts Floating Rate Funds Invest in debt securities with floating interest rates
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Birla Mutual Fund BOB Mutual Fund Canara Bank Mutual Fund Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund LIC Mutual Fund Prudential ICICI Mutual Fund Reliance Mutual Fund SBI Mutual Fund Franklin Templeton Investments
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