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Mutual Fund Unit 2

Mutual funds you can learn the effective thing by this to improve your self and you can enhance your knowledge

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Aman Chauhan
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73 views30 pages

Mutual Fund Unit 2

Mutual funds you can learn the effective thing by this to improve your self and you can enhance your knowledge

Uploaded by

Aman Chauhan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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 Mutual fund is a fund managed by investment

company with an financial objective of


generating high rate of returns.

 These investment companies combines the


funds of many individual investors having
similar investment objective.

 These companies collects money from


investors and invests those money in
different stocks, bonds and other financial
securities in a diversified manner.
 Before investing they carryout thorough
research and detailed analysis on the
market conditions and market trends of
stock and bond prices.

 The entire income/profits are


distributed to the investors in
proportion to their investments.
The foundation for the mutual
fund operation in India was
laid by parliament in 1963
with an enactment of UTI.

 The phases as follows……..


+UTI was setup by RBI & functioned under
control of RBI.

+In 1978 UTI was delinked by RBI, IDBI took


over the regulatory and control of UTI.
 Broadening of industry :
 Entry of Commercial banks & public sector financial
institutions.

 SBI Mutual Funds is a first Non- UTI Mutual fund


Established in June 1987
NAME OF THE COMMERCIAL YEAR
BANK/INSTITUTION
SBI 1987
Canara Bank 1987
LIC 1989
GIC 1991
Indian Bank 1990
Bank of India 1990
P.N.B 1990

NOTE:-
TOTAL ASSETS OF INDUSTRY GREW ABOUT 61,000 crores.
 Kothari pioneer was the first private sector
mutual fund which was established in July
1993.
 International players like MORAGAL
STANLEY ,J.P.MORGAN ,CAPITAL
INTERNATIONAL etc., followed…….
 The total assets is worth 1,21,805 crores.
 UTI Act 1963 bifurcated into two separate
entities in Feb 2003 .
+ One is specified undertaking of UTI with the
assets of rupees 29,835 crores.
- functioned under rules framed by
Govt.of.India.
-Does not comes under mutual fund
regulations.
+ The second is the UTI Mutual fund Ltd with
the assets of 76000 crores.

- Sponsored by SBI,PNB,BOB & LIC.

- Registered with SEBI.

- Functions under mutual fund Regulations.


The graph indicates the growth of assets over the years:
SPONSOR
 Sponsor is basically a promoter of the fund.
 For e.g., BOB,PNB,SBI,LIC are the sponsors of

UTI Mutual Funds.


 HDFC & Standard Life Investments Limited are

the sponsors of HDFC mutual funds.


 The fund sponsor raises money from public, who become

fund shareholders.
 The pooled money is invested in the securities.
 Sponsor appoints trustees.
 Two third of the trustees are independent professionals
who own the fund and supervises the activities of the
AMC.
 It has the authority to sack AMC employees for non-

adherence to the rules of the regulator.


 It safeguards the interests of the investors.
 They are legally appointed i.e. approved by SEBI
 Asset Management Company (AMC) is a set of
financial professionals who manage the fund.
 It takes decisions on when and where to invest the

money.
 It doesn’t own the money.
 AMC is only a fee-for-service provider.

NOTE:
The above 3 tier structure of Indian mutual funds is
very strong and virtually no chance for fraud.
 A Custodian keeps safe custody of the investments (related
documents of securities invested).
 A custodian should be a registered entity with SEBI.
 If the promoter holds 50% voting rights in the custodian
company it can’t be appointed as custodian for the fund.
 This is to avoid influence of the promoter on the custodian.
 It may also provide fund accounting services and transfer
agent services.
 JP Morgan Chase is one of the leading custodians.
 Transfer Agent Company interfaces with the customers,
issue a fund’s units, help investors while redeeming
units.

 Provides balance statements and fund performance


fact sheets to the investors.

 CAMS is a leading Transfer Agent in India.


CLASSIFICAITON OF MUTUAL
FUNDS
 OPERATIONAL CLASSIFICATION

 PORTFOLIO CLASSIFICATION

 GEOGRAPGICAL CLASSIFICATION

 STRUCTURAL CLASSIFICATION
OPERATIONAL CLASSIFICATION
o Open-End Mutual Funds

o Close-End Mutual Funds

o Interval Funds
PORTFOLIO CLASSIFICATION
 Growth Oriented Funds/Equity Oriented Funds
 Income / Debt-Oriented Funds
 Balanced Funds/ Income and Growth Oriented Funds
 Bond Funds
 Stock Funds
 Index Funds
 Industry Funds
 Tax Relief Funds
 Leveraged Funds

Cont……
 Real Estate Funds
 Money Market Mutual Funds
 Asset Management Mutual Funds
 Liquid Funds
 Gilt Funds
 Load / Non-Load Fund
 Systematic Investment Plan (SIP)
 Retirement Pension Plan
 Insurance Plan
GEOGRAPHICAL CLASSIFICATION
DOMESTIC MUTUAL FUNDS

OFF-SHORE MUTUAL FUNDS



ADVANTAGES OF MUTUAL FUNDS:
Other Advantages Of Mutual Funds
DISADVANTAGES OF MUTUAL
FUNDS
No control over costs
No tailor-made portfolios

Managing a portfolio of funds

Delay in redemption
MARKET RISK:

- Markets fall on account of macro economic factors.

NON-MARKET RISK:
- Bad news about an individual company can pull down it’s
stock price.
INTERST RATE RISK:
-when the interest rate falls bond prices falls this effects the
NAV Negatively

CREDIT RISK:
-when funds invested the bonds there is a risk of the corporate
defaulting on their interest payments and principle payments
obligations.
EFFICIENCY OF MUTUAL
FUNDS
Efficiency of a mutual funds can be judged by the
following…
 Stability
 Liquidity
 Growth
 Credibility of issuer
 returns
 Management Approach

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