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    Mutual funds allow investors to pool their money together into a single investment vehicle that is managed by professional fund managers. The money is invested in a diversified portfolio including stocks, bonds and other securities. Investors share the income and capital gains or losses generated by the fund proportionate to their investment. Mutual funds provide investors easy access to a diversified basket of securities at a relatively low cost compared to investing on their own. They offer an opportunity for common investors to benefit from professional fund management.

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    Sapm

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    Mutual funds allow investors to pool their money together into a single investment vehicle that is managed by professional fund managers. The money is invested in a diversified portfolio including stocks, bonds and other securities. Investors share the income and capital gains or losses generated by the fund proportionate to their investment. Mutual funds provide investors easy access to a diversified basket of securities at a relatively low cost compared to investing on their own. They offer an opportunity for common investors to benefit from professional fund management.

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    Mutual funds allow investors to pool their money together into a single investment vehicle that is managed by professional fund managers. The money is invested in a diversified portfolio including stocks, bonds and other securities. Investors share the income and capital gains or losses generated by the fund proportionate to their investment. Mutual funds provide investors easy access to a diversified basket of securities at a relatively low cost compared to investing on their own. They offer an opportunity for common investors to benefit from professional fund management.

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    Sapm

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    Mutual funds allow investors to pool their money together into a single investment vehicle that is managed by professional fund managers. The money is invested in a diversified portfolio including stocks, bonds and other securities. Investors share the income and capital gains or losses generated by the fund proportionate to their investment. Mutual funds provide investors easy access to a diversified basket of securities at a relatively low cost compared to investing on their own. They offer an opportunity for common investors to benefit from professional fund management.

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    MUTUAL FUND

    Presented by:
    Anchal Mathur
    Gitanjali Joshi
    Pramil KumarGupta
    Ronak Doshi
    Parag Dhakate
    An old Axiom :

    “It is not wise to put all eggs


    into one basket”

    ……… was probably in the minds of


    those who formed the first mutual fund.
    Concept
    • A Mutual Fund is a trust that pools the savings of a number of
    investors who share a common financial goal.

    • The money thus collected is then invested in capital market


    instruments such as shares, debentures and other securities.

    • The income earned through these investments and the capital


    appreciation realized are shared by its unit holders in
    proportion to the number of units owned by them.

    • Thus a Mutual Fund is the most suitable investment for the


    common man as it offers an opportunity to invest in a
    diversified, professionally managed basket of securities at a
    relatively low cost.
    Mutual fund industry in India
    Concept of mutual fund introduced by UTI in 1963 in
    India.
    Around 1000 mutual fund schemes in India.
    A compounded growth of 28% over 2006-2010, 
    Total Assets under Management size in India of all
    Mutual funds is about Rs. 8,05,239 crs. at the end of
    June 2010.
    Can be broadly put into four phases according to the
    development of the sector.
    Organizational Structure of MF
    SEBI (mutual fund) Regulation,1996
    Structure of MF in India
    SPONSER

    TRUSTEE

    AMCs
    Custodian

    Distribution/Agents Banker R&T Agents


    Sponsor
    Akin to the Promoter of the company,
    Contribute min 40% of net worth of AMC,
    Posses sound financial record over five years
    period,
    Establishes the Fund,
    Gets it registered with the SEBI,
    Forms a trust, & appoints Board of trustee.

    Trustees
    Holds assets on behalf of unit holders in trust.
    Trustees are caretaker of unit holders money.
    Two third of the trustees shall be independent
    persons (not associated with the sponsor).

    Trustees ensure that the system, processes &


    personnel are in place.

    Resolves unit holders GRIEVANCES.

    Appoint AMC & Custodian, & ensure that all


    activities are accordance with the SEBI regulation.
    Custodian
    Holds the fund’s securities in safekeeping,
    Settles securities transaction for the fund,
    Collects interest & dividends paid on securities,
    Records information on corporate actions.

    Examples of custodian

    HDFC CITY BANK

    ABN AMRO IIT CORPORATE SERVICES

    SBI INDIA STANDARD CHARTRED

    SHCIL DEUTSCHE BANK


    Asset Management Company
    Floats schemes & manages according to SEBI.
    Can not undertake any other business activity,
    other than portfolio mgmt services.
    75% of unit holders can jointly terminate
    appointment of AMC.
    At least 50% of independent directors.
    Chairman of AMC can not be a trustee of any MF.

    Examples of AMC
    UTI ICICI Prudential Reliance
    SBI Canbank ING Vysya
    Stanchart Taurus HSBC
    Distributor / Agents
    Sell units on the behalf of the fund.
    It can be bank, NBFCs, individuals.

    Banker
    Facilitates financial transactions,
    Provides remittance facilities.

    Registrar & Transfer Agent


    Maintains records of unit holders’ accounts &
    transactions
    Disburses & receives funds from unit holder
    transactions,
    Prepares & distributes a/c settlements,
    Tax information, handles unit holder
    communication,
    Provides unit holder transaction services.

    Examples of R & T Agents


    CAMS KARVY
    MCS Ltd Datamatics
    MN Dastoor & Co IIT Corporate Services
    Computeronics TCS
    ICICI Infotec UTI ISL
    Regulators of mutual fund in India

    AMFI (The Association of Mutual Funds in India )

    SEBI (Securities and Exchange board of India).


    AMFI

    • AMFI is the industry association of all mutual funds


    operating in India.
    • It is a non-profit organization
    • Incorporated on 22 August, 1995.
    • Apex body of all the registered AMCs.
    • All AMCs are its member.
    • Objective to maintain high ethical & professional
    standard.
    .
    ROLE AND ACTIVITIES OF ASSOCIATION
    OF MUTUAL FUNDS IN INDIA

     To promote and protect the interests of Mutual Funds and


    their unit holders.

     To define and maintain high ethical and professional


    standards in the industry.

     To enhance public awareness of Mutual Funds.

     To represent industry views and suggestions to the


    Regulator, Government and the Central Bank

     Provide certificate to Agents to sell MF


    Regulatory Aspect
    • SEBI (MF), 1996 as regulator of MF.
    Provisions of SEBI IMPACT
    Legal character of MF •MF can be set up only as TRUST.
    •MF can’t invest in Gold, silver & real asset.
    •Unit holder can’t challenge trustees.

    Structure of MF •Arms-length relationship b/w various constituents.


    •Independent custodian.

    Registration of MF •Must fulfill eligibility criteria u/s 7.


    •AMC have min net worth of 10 cr.

    Operation of MFs •Disclosure of information.


    •Advertisements.
    •Daily pricing.
    •Risk management system.
    AMFI Classification of MF schemes
    Fund schemes Portfolio objectives

    Growth & Income High Risk & High Return

    Balanced Moderate Risk & Return

    Liquid & Money Market Fixed Return

    Gilt Zero Risk

    ELSS Tax Saving

    Fund of funds Additional diversification

    Each category is classified into more sub-categories.


    TYPES OF MUTUAL FUNDS
    Other classification of MF schemes
    • By Structure
    – Open-Ended – anytime enter/exit
    – Close-Ended Schemes – listed on exchange, redemption after period of
    scheme is over.
    • By Investment Objective
    – Equity (Growth) – only in Stocks – Long Term (3 years or more)
    – Debt (Income) – only in Fixed Income Securities (3-10 months)
    – Liquid/Money Market (including gilt) – Short-term Money Market
    (Govt.)
    – Balanced/Hybrid – Stocks + Fixed Income Securities (1-3 years)

    • Other Schemes
    – Tax Saving Schemes
    – Special Schemes (ETFs, foreign funds)
    Risk –Return of different schemes
    Investment Strategy
    • Systematic Investment Plan (SIP)
    – Invest a fixed sum every month. (6 months to 10 years)
    – Fewer units when the share prices are high, and more units
    when the share prices are low. Average cost price tends to fall
    below the average NAV.
    – Nowadays ,Insurance is free with SIP.
    • Systematic Transfer Plan (STP)
    – Invest in debt oriented fund and give instructions to transfer a
    fixed sum, at a fixed interval, to an equity scheme of the same
    mutual fund.

    • Systematic Withdrawal Plan (SWP)


    • Flexi Withdrawal Plan (FWP)
    • Dividend sweep
    Investment option

    • Growth option
    – investors who are looking for capital appreciation.

    • Dividend payout option


    – investors who are looking for cash inflow or income.

    • Dividend reinvestment option


    – When the investor chooses to reinvest the dividend in the
    scheme.
    Portfolio Management Process

    INVESTMENT OBJECTIVE

    PORTFOLIO CONSTRUCTION

    SECURITY SELECTION

    INVESTMENT

    PORTFOLIO OPTIMISER
    Fund Management Process

    Expected Return

    Portfolio Optimal
    Volatility &
    Optimization Portfolio
    Correlation Estimates

    Constraints on
    Investor objective
    Portfolio choice
    Fund manager’s Investment Judgments
    Return Risk

    market Beta or Market Risk

    Extra market co-variance


    Group /Industry
    Or
    Growth Cyclical stable
    Group /Industry Risk

    Individual Stock Specific Risk

    Active Passive
    Strategy Strategy
    Some important terms
     Entry and Exit loads
     Repurchase price
     Market Price
     Issue price
     NAV ( net asset value) =

    M.V OF FUND’S INVESTS + REC + ACCRUED INCOME – LIABILITIES – ACCRUED EXP


    NO. OF SHARES OR UNITS OUTSTANDING
    Measurement of Mutual Funds
    By Total Return
    Income + Capital Gain +/- Price Change
    Initial Investment
    Versus Return of Peer Groups
     By broad or narrow categories of fund investments
     By investment objective
     By investment style based on historical holdings (general equity
    funds)
    Versus Return of an Index
     May be broad or focus on particular region or country
     “Theoretical” index return does not include expenses that would be
    involved if an actual portfolio

    2–29
    Performance of mutual funds
    Methods used for performance evaluation
    Jenson measure
    Ri = Rf + Bi (Rm - Rf)
    Treynor measure (reward to volatility)
    Treynor's Index (Ti) = (Ri - Rf)/Bi.
    Sharpe measure (reward to variability)
    Sharpe index (Si) = (Ri - Rf)/Si
    How Do You Make Money
    on a Mutual Fund?

    A mutual fund investor can make money in several ways:


    1. The fund earns income from interest or dividends
    on its investments which it distributes to its
    investors.
    2. The fund produces capital gains by selling
    securities at a profit and distributes those gains
    to its investors.
    3. You sell your shares of the mutual fund at a
    higher price than you paid for them.
    WHY CHOOSE MUTUAL FUNDS?

    Affordability

    Professional management

    Diversification

    Convenience

    Liquidity

    Tax breaks

    Transparency
    Drawbacks of Mutual Funds

    No Guarantees

    Fees and commissions

    Taxes

    Management risk
    CONCLUSION
    THANK YOU

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