About Mutual Funds History of Mutual Funds Structure of Mutual Funds Risk Measurement of NAV AMC Conclusion

Is a type of intermediary

Pools of funds of investors

Gather savings from investors

Invests in a different types of financial claims

Mutual Funds Industry in India BACKGROUND Discussion in Parliament HIGHLIGHTS

On Why should there be a Mutual Funds ?

19631987
Association of Mutual Funds In India (AMFI)

1996

19871993

1993

 Bank Sponsored- SBI Funds Management Pvt.Ltd.

UTI Asset Management Pvt.Ltd.

Institutions Jeevan Bima Sahayog Asset Management

Co. Ltd. Private Sector Indian Kotak Mahindra Asset Management Reliance Capital Asset Management Ltd. Joint Ventures(Pre Dominantly Indian) Birla Sun Life Asset Management Co. Ltd. HDFC Asset Management

Not get rich quick investments

Not assured return investments

Not risk free investments

Not a Universal solution to all Investment needs

1) It increases the purchasing power of investors 2) Enables them to have well diversified portfolio even with small amount. 3) Reduction of risk 4) Money would be managed by professional at low cost. 5) Liquidity 6) Flexibility to change investment objectives

The investors have two types of options available Dividend Option and Growth Option.

Under Dividend Option there are two options available i.e. Dividend payout option and Dividend reinvestment option.

Growth option is one where the investor does not want any profit rather he wants his returns to grow there by being compounded. Under Dividend Payout Option the investor would receive dividends as and when they are declared. And under Dividend Reinvestment Option the dividend received is reinvested at the NAV prevalent immediately after declaration of dividend.

Mutual fund products are classified into: Open end and Closed end fund Equity fund, Debt fund, Balanced fund Load fund and no-Load fund. Open-end fund is one which is always open to accept money from investors and to return money back to the investors. Closed-end fund is formed by an AMC for a fixed tenure. The fund are mobilized only during NFO and does not reopen after NFO.

A simple diversified equity fund:

Index funds

Sector specific fund or a sectoral fund:

Diversified Debt fund Gilt fund Focused Debt fund High Yield Debt fund Liquid fund or Money Market fund Floating rate Debt fund

Of all the asset classes, cash investments (i.e. money markets) offer the greatest price stability but have yielded the lowest long-term returns.

Investor Psychology Risk

Choice Risks

Cost Risks

Prediction Risks

Competition Risks

Risks of changes in the Regulatory Norms

Risks of Blind Diversification

Management Change Risks

 The most important part of the calculation is the valuation of the assets owned

by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. Asset value is equal to Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued /Amount due on unpaid assets /Expenses accrued but not paid Details on the above items For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the principal exchange where the security is traded

 Sum market value of shares + liquid assets divided by

no of units of total money invested i.e. 10 Rs = 1 Unit mf.xlsx Eg Total investment is Rs 100,00,00,000 Sum market value of shares Rs 37,29 ,67 ,966 Liquid assets Rs 62,70,32,034 There for NAV is 1000000000/100000000=10

 Sum market value of shares + liquid assets divided by

no of units of total money invested i.e. 10 Rs = 1 Unit mf.xlsx E.g. Total investment is Rs 102,34,37,709 Sum market value of shares Rs 39,64,05,675 Liquid assets Rs 62,70,32,034 There for NAV is 102,34,37,709 /100000000=10.234377 i.e. 10.2

 An Asset management company is a company

registered under the companies act 1956. Sponsor creates an asset management company and this is the entity, which manages the funds of the mutual fund (trust). The mutual fund pays a small fee to the AMC for management of its fund. AMC acts under the supervision of trustees and is subject to regulations of SEBI too.

1. Sponsor should have sound track record and general reputation of fairness and integrity

I. be carrying on business in financial services for a period of not less than five years II. the net worth is positive in all the immediately preceding five years; and III.the net worth in the immediately preceding year is more than the capital contribution of the sponsor in the asset management company; and IV. the sponsor has profits after providing for depreciation, interest and tax in three out of the immediately preceding five years, including the fifth year
2.The applicant is a fit and proper person

Appointment of trustees to act as trustees for the mutual fund in accordance with the provisions of the regulations

Appointment of asset management company to manage the mutual fund and operate the scheme of such funds in accordance with the provisions of these regulations

Appointment of a custodian in order to keep custody of the securities and carry out the custodian activities as may be authorised by the trustees.

In the case of an existing mutual fund, such fund is in the form of a trust and the trust deed has been approved by the Board;

The sponsor has contributed or contributes at least 40% to the net worth of the asset management company

the sponsor or any of its directors or the principle officer to be employed by the mutual fund should not have been guilty of fraud or has not been convicted of an offence involving moral turpitude or has not been found guilty of any economic offence.

A complete list of your group/associate companies registered with SEBI in any capacity, also indicate the capacity in which they are registered and the SEBI Registration number.

Whether any of the sponsor or its group/associate companies are listed in any of the recognised stock exchange(s) in India.

Whether there have been any instances of violation of or non-adherence to any securities related regulations and whether any action has been taken against you or any of your associate/group companies in this regard, by a regulatory agency in India or abroad

Declaration in terms of Regulation 7(d) of SEBI regulation 1996 regarding sponsor company or any of directors of sponsor company have not been found guilty of fraud or have not been convicted of an offence involving moral turpitude or have not been found guilty of any economic offence. If there are such cases, full details should be provided.

Details of companies for registering as per RBI act as BANK or NBFCs

Whether any of the directors or employees of your company or your group / associate companies were ever associated with any organisation as a director or an employee against whom SEBI had initiated action of suspension or cancellation of certificate of registration or initiated any other action under the provisions of SEBI Act or launched any prosecution for acts committed during their association.

Existing infrastructure for client servicing, complaints handling; Track record of complaint / grievance handling Compliance philosophy and practice.

Incorporation of the Asset Management Company and the Trustee Company/Board of trustees

Auditors certificate

Filing of executed copies of Trust Deed and Investment Management Agreement.

Setting up of Infrastructure by the Applicant

Grant of Certificate of Registration

 HDFC Mutual Funds ICICI Mutual funds Reliance Mutual Funds UTI Mutual Funds Birla Sun Life

SBI
LIC

 Availability of a large number of mutual funds schemes

makes Investment decision complex and difficult Complicated KYC norms restrict potential Investors Investment in Mutual Funds is attractive to customers owing to tax benefits Consistency in fund performance and brand equity influence customers to make relevant selection of mutual fund schemes Simplification of Processes to Increase the Quantum of Investments

conclusion