Mutal Funds

8/14/2019 Mutal Funds

1/30

By Anuj Dudeja

B.Com(Hons),PGDM(Finance)

Business School Of Delhi

28/1 Knowledge Park- III

Greater Noida.

02/25/09 www.businessschoolofdelhi.com 1


2/30

What is Mutual Fund?What is Mutual Fund?

It pools the savings of investors for collectiveinvestment in a diversified portfolio of securities.

SEBI(Mutual Fund) Regulation,1996 define a

mutual fund asa fund established in the form of a trust to raise

money through the sale of units to the public or a

section of the public under one or more schemesfoe investing in securities, including money

market instruments.



3/30

Growth of Mutual Fund in IndiaGrowth of Mutual Fund in IndiaPhase I(1964-87)

The Unit Trust of India (UTI) was first mutual fund set up underthe UTI Act,1963 and become operational in 1964. UTI

investible fund at market value of Rs49cr to RS5,068cr .

Phase II(1987-1992)

In this phase mutual fund companies is sponsored bynationalized banks and insurance companies as a trust under the

Indian Trust Act,1882.

Phase III (1992-1997)

SEBI issued the Mutual fund regulation in January 1993.

Private and foreign Players were allowed entry in the mutual

fund industry.



4/30

Continue..Continue..Phase IV (1997 onwards)

In this phase the flow of funds into the kitty of funds

sharply increasing. Investible funds at market value of

the industry rose by June 2000 to over Rs1,10,000.



5/30

Benefits.Benefits.Professional Management.

Average investor doesnt have the goodknowledge of the capital market to reap the benefits of investment. Expert are required tofetch the profit from the capital market.

Portfolio Diversification.Lowers the risk because, regardless of the size ofyour investment, each unit purchased is made upof many different investments

Liquidity.Mutual funds can be sold anytime, and easily.

Convenience.

Less paperwork, reduce time and easy to invest.



6/30

Continue.Continue.Flexibility:

Mutual funds allow you to purchase as much or aslittle as you want, and offer a variety of purchaseplans.

Tax Benefits.

All dividends declared by debt-based mutual fundsare tax-free in the hands of the investor, investors inELSS (equity-linked savings schemes) can availrebate under Section 88 of the Income Tax Act,

1961 on investment up to Rs 10,000 subject to thevarious conditions laid down in the said Section.Transparency.Well Regulated by SEBI.



7/30

TYPES OF MUTUAL FUNDSTYPES OF MUTUAL FUNDS


8/30

Functional Mutual Fund Scheme

Open-Ended Schemes :Investor can sell and repurchase its unit at NAV

or NAV-related price.

Need not to be listed on the stock exchangeInvestor can enter and exit any time during the

life of the fund.

No fixed redemption period.It is very liquid.



9/30

Close-end Scheme:

Fixed maturity period ranging from two to fiveyear.

Investor can spend when scheme is launched andscheme remain open for period not exceeding 45days.Investor can buy units only from the market, when

subscription is over thereafter units are listed on thestock exchange where they are bought and sold.

Interval Scheme:

It is the combination of open-ended & close-endedscheme. They are open for sale or redemptionduring predetermined interval @ NAV-relatedprices.



10/30

Investment Objective Scheme

Growth Fund:

Objective is to give capital appreciation from

medium term to long term.

Investment done mostly in equity shares with

significant growth potential & offer high returnto the investor in long term.

Risk is high because no guarantee or assurance

of return.It is usually close ended and listed on stock

exchange.



11/30

Income Fund

Aim to provide safety of investments &regular income to investor.

Instrument is used for investment purpose aregilt scheme, commercial papers, debentures,bonds.

Risk and return is low in income fund ascompare to growth fund.

Balanced Fund

It provide capital appreciation and regularincome as the investment in balanced in equityand dept instrument.


M M k t F d


12/30

Money Market FundsInvestment is done in the short term

money market instruments like T-billsand Certificate of deposits.Highly liquid with low rate of return.Corporate invest in these funds to park

their short term surplus funds.

OtherLoad FundSchemes which charge s load i.e.

brokerage exp, communication exp.

Index FundsIt replicated the portfolio of a particular

index such as BSE & NSE Sensex.



13/30

Investing ChecklistInvesting ChecklistDraw up your asset allocation

Financial goals & Time frame (Are you investing for retirement? A childseducation? Or for current income? )

Risk Taking Capacity

Identify funds that fall into your Buy List

Obtain and read the offer documentsMatch your objectives

In terms of equity share and bond weightings, downside risk protection, taxbenefits offered, dividend payout policy, sector focus

Check out past performancePerformance of various funds with similar objectives for at least 3-5 years

(managed well and provides consistent returns)



14/30

RIGHTS AS A MUTUAL FUNDRIGHTS AS A MUTUAL FUND

UNITHOLDERUNITHOLDER

Receive statement of accounts within 6 weeks fromthe date your request is received by the MutualFund.

Receive information about the investment policies,objectives, financial position and general affairs othe scheme.

Receive dividend within 30 days of theirdeclaration, receive redemption proceeds within 10days from the date of the valid redemption.



15/30



16/30

Frequently used termsFrequently used termsNAV (Net Asset Value)

Net Asset Value is the market value of the

assets of the scheme minus its liabilities. Theper unit NAV is the net asset value of thescheme divided by the number of unitsoutstanding on the valuation date.

Sale PriceIs the price you pay when you invest in ascheme. Also called Offer Price. It may includea sales load.

Repurchase PriceIs the price at which units under open-endedschemes are repurchased by the Mutual Fund.

Such prices areNAV related.02/25/09 www.businessschoolofdelhi.com 16


17/30

Redemption price

Is the price at which close-ended schemesredeem their units on maturity. Such prices areNAV related.

Sales Load

Is a charge collected by a scheme when it sellsthe units. Also called, Front-end load. Schemesthat do not charge a load are called No Loadschemes.

Back-end load.

Is a charge collected by a scheme when it buysback the units from the unit holders.


O i ti Fl f M t lO i ti Fl f M t l


18/30

Organization Flow of MutualOrganization Flow of MutualFundFund


TRU TURAL I UE MUTUAL


19/30

TRU TURAL I UE MUTUALFUNDS)FUNDS)

BY A SPONSOR

BODY CORPORATE WHO ACTING ALONE OR IN

COMBINATION WITH ANOTHER BODY

CORPORATE

FLOATS THE IDEA OF SETTING UP OF MUTUALFUND

ESTABLISHES MUTUAL FUND IN FORM OFTRUST

TRUST DEED EXECUTED WITH BOARD OF

TRUSTEES

REGISTERS IT WITH SEBI

40% CONTRIBUTION TO AMC



20/30

Continue.Continue.

TO RAISE MONIES BYTRUSTEES HOLDG PROPERTY OF MF IN TRUST FOR BENEFIT OF UNIT

HOLDERS

THROUGH THE SALE OF UNITS REPRESENTING ONE UNDIVIDED SHARE IN THE ASSETS OF

A SCHEME

FOR INVESTING IN SECURITIES

APPLICATION FEES:5000;

REGISTRATION FEES:10 LACS;

ANNUAL FEES : 1 LAC



21/30

STRUCTURAL ISSUES(MUTUAL FUNDSTRUCTURAL ISSUES(MUTUAL FUND

TRUST)TRUST)

MF TO BE CONSTITUTED IN FORM OF MFTRUST

MANAGED BY A BOARD OF TRUSTES IN

WHOSE FAVOURTRUST DEED IS EXECUTED

BY SPONSORS

50% MEMBERS NOT AFFILIATED WITH

SPONSORS

CONTROLS ALL CAPITAL PROPERTY OF MF

SCHEMES/ HOLDS THEM IN TRUST FOR

HOLDERS



22/30


23/30

Continue.Continue.MUTUAL FUND TRUST LIST

ALLIANZ CAPITAL & MGT SERVICES LTDANZ GRINDLAYS BANKTIMES MUTUAL FUNDSUNIT TRUST OF INDIAVLS FINANCE LTD.KOTAK MAHINDRA FINANCE LTDPRUDENTIAL CAPITAL MARKETS LTD.

SBI FUNDS MANAGEMENT LTDCEAT MF & ASSET MANAGEMENTCOMPANY LTD



24/30


25/30

Continue.Continue.AMC(LIST)

20TH CENTURY AMC LTDAPPLE 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.



26/30

Continue.Continue.INVESTMENT MIX

EQUITY SHARES/EQUITY RELATED INSTRTS (CDs)/DEBT INSTRUMENTS (NCDs, PSBONDS,GOVTSECT)/MONEY MARKET INSTRTS(TBs, CPs & BILLS)

TYPICAL ASSET MIXSCHEME EQUITY DEBT MONEY MKTGROWTH 70-90% 5-20% 0-10%INCOME 20-30% 60-70% 0-15%BALANCED 40-60% 40-50% 0-10%



27/30

FINANCIAL KEYSFINANCIAL KEYSNAV= M.V OF FUNDS INVESTS+REC+ACCRUED

INCOME- LIABILITIES-ACCRUED EXP

NO. OF SHARES OR UNITS OUTSTANDING

RATE OF RETURN= NAV AT END-NAV ATBEGINNING + DIVIDENDPAID

NAV AT BEGINNING

INITIAL EXPENSES: CEILING OF 6%

RECURRING EXPENSES: MAX 3% OF ANET ASSETSIN A YEAR



28/30


G h f hG th f t th


29/30

Growth of assets over the yearsGrowth of assets over the years


http://www.amfiindia.com/showhtml.asp?page=mfindustryhttp://www.amfiindia.com/showhtml.asp?page=mfindustry


30/30

No of Schemes in MutualNo of Schemes in Mutual

FundFund

02/25/09 b i h l fd lhi 30

Mutal Funds

Documents

Transcript of Mutal Funds