Presentation on Mutual Funds

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Presentation on Mutual Funds

  1. 1. IFS Talk Show onMUTUAL FUNDS Tolani Institute of Management Studies
  2. 2. INTRODUCTION Mutual Fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Tolani Institute of Management Studies
  3. 3. Flow / Process of Mutual Funds Tolani Institute of Management Studies
  4. 4. Organization of a Mutual Fund Tolani Institute of Management Studies
  5. 5. SEBI RegulationsThe mutual funds are registered and regulatedunder the SEBI (MF) regulation, 1996These regulations deal with Launching of schemes Disclosures in the offer documents Advertisement Investment objectives Pricing of units Tolani Institute of Management Studies
  6. 6. The SEBI (Mutual Fund) Regulation 1996, contains 11 schedules. No. Of schedule ParticularFirst schedule Proforma of various forms to be usedSecond schedule Various fees payable by mutual fundsThird schedule Content of the trust deedFourth schedule Content of investment management agreementFifth schedule Code of conductSixth schedule Advertisement codeSeventh schedule Restriction on investmentEighth schedule Investment valuation normsNinth schedule Accounting policies and standardsTenth schedule Initial issue expensesEleventh schedule Annual report Tolani Institute of Management Studies
  7. 7. Registration of Mutual FundEvery mutual fund shall be registered with SEBI through anapplication to be made by the sponsor in the prescribedprofoma, accompanied by a non refundable application fee ofRs.2500.Every mutual fund shall pay Rs.25 lakh towards registration feeand Rs.2,50,000 p.a. as service feesRegistration will be granted by the Board on fulfilment ofconditions such as Sponsor having a sound track-record of five years The net worth of the immediately preceding year being more than the capital contribution of the sponsor in AMC and the sponsor showing profits after providing for depreciation Tolani Institute of Management Studies
  8. 8. Regulations as to the TrustA mutual fund shall be constituted in the form of atrust under the provision..... Indian Registration Act, 1908(U/S 16 of 1908) and trust deed containing the provisions laid down by SEBI.What percent of the trustees shall be independenttrustees At least two-third of the trustees shall be independent trustees(who are not associated with an associate, subsidiary or sponsor in any manner). Tolani Institute of Management Studies
  9. 9. Regulations as to AMCThe AMC shall have a minimum net worth of.... Rs.10 croreWhat percent of the directors of the Board ofManagement of the AMC should not be associatedwith the sponsor or its subsidiaries or the trustees At least 50 percent Tolani Institute of Management Studies
  10. 10.  BorrowingsIt shall not borrow more than 20% of the NAV ofthe scheme and for a maximum period of 6month Income distributionAll Mutual Funds must distribute a minimum of 90%of their profits in a given year. Underwriting of securitiesMutual Funds are permitted to enter into anunderwriting agreement after obtaining a Certificateof Registration from SEBI. The underwritingobligation of a Mutual Fund shall not exceed thetotal NAV of the scheme. Tolani Institute of Management Studies
  11. 11. Pricing of unitsParticular Open end scheme Close end schemeRepurchase Not less than 93% of Not higher thanprice NAV 107% of NAVSale price Not less than 95% of The difference NAV between repurchase and sales price should not exceed 7% Tolani Institute of Management Studies
  12. 12. Mutual Fund ConceptsNet Asset value Net Asset Value is the market value of the assets of the scheme minus its liabilities on day of valuation. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date. Tolani Institute of Management Studies
  13. 13. Expense Ratio It is ratio of expenses incurred by a mutualfund for managing a fund to net assets of thefund. The expense represent the proportion of thefund’s assets that means the expense of therunning fund. Expense ratio is charged as apercentage of net assets & subtracted from theinvestor’s investment every year.
  14. 14.  Entry and Exit Load Mutual fund incur certain expenses such as brokerage, marketing expenses, communication expenses.These expenses are known as “Load” and are recovered by fund when it sells the unit to the investors or repurchases units from with holders. Front • When investors enter End into scheme Load Back • When investor get out of the End scheme Load Tolani Institute of Management Studies
  15. 15. Assets Under Management (AUM) Total market value of the assets managed by the investment company on behalf of the investors is known as Assets Under Management. AUM of a scheme is calculated by multiplying the net assets value of scheme by the number of units issued by the scheme. Tolani Institute of Management Studies
  16. 16. Mutual Fund Classification By Structure By Investment Objective Open-Ended schemes  Growth / Equity Oriented Schemes Closed-Ended schemes  Income / Debt Oriented Interval schemes Schemes  Balanced Funds  Money Market / Liquid Schemes Tolani Institute of Management Studies
  17. 17. Special Schemes Index Fund Schemes Sector Specific Fund Schemes Tax saving Schemes, for ex: ELSSOther Schemes Fixed Maturity Plans (FMP) Exchange Traded Funds (ETF) Capital Protection Oriented Schemes Gold Exchange Traded Funds (GETF) Quantitative funds Fund of Funds (FOF) Funds Investing Abroad Real Estate Mutual Funds Tolani Institute of Management Studies
  18. 18. Return & Risk in different type of Mutual Funds Tolani Institute of Management Studies
  19. 19. ADVANTAGES Professional Management Diversification Convenient Administration Potential of giving handsome returns Liquidity Flexibility Well Regulated Tolani Institute of Management Studies
  20. 20. Cont… Low Costs Variety of Schemes Transparency Tolani Institute of Management Studies
  21. 21. DISADVANTAGES Management Risk Too Much Diversification Taxes Fees & Commissions Tolani Institute of Management Studies
  22. 22. Distribution Channel BanksDirect Customer OrganisedSelling Distributors Financial Advisors Tolani Institute of Management Studies
  23. 23. Association of Mutual Funds in India (AMFI) AMFI was established in 1993, realising the demand for a common forum for Mutual Fund Industry. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders. AMFI interacts with SEBI and works according to SEBIs guidelines in MF industry. AMFI represent the Government of India, the RBI and other related bodies on matters relating to the Mutual Fund Industry. AMFI undertakes investor awareness programme to promote proper understanding and working of MFs. Tolani Institute of Management Studies
  24. 24. Investment Strategies Systematic Investment Plan (SIP): Under this a fixed sum is invested each month on a fixed date of a month. Systematic Transfer Plan (STP): Under this plan an investor 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): As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the facility to withdraw a pre-determined amount / units from his fund at a pre-determined interval. Tolani Institute of Management Studies
  25. 25. Advantages of SIP Habit of investing regularly Power of Compounding Rupee Cost Averaging (RCA) Convenience Tolani Institute of Management Studies
  26. 26. Power of Compounding in SIP Started At the Investment Total Amount Corpus at Investing age of Period Invested the age of 60Person A 1000/month 30 30 3,60,000 14,17,613Person B 1000/month 35 25 3,00,000 9,14,839 Note: Rate of return of 8% compounded has been assumed. Tolani Institute of Management Studies
  27. 27. HDFC Growth Fund Investment Objective: To provide long term capital appreciation Investment Pattern:  80-100% in Equity  0-20% in Debt & Money Market Benchmark Index: SENSEX Past performance: PERIOD Returns (%) Benchmark returns (%) Last 1 Year 18.04 10.94 Last 5 Years 16.35 11.50 Since Inception 22.87 14.41 Tolani Institute of Management Studies
  28. 28. HDFC Arbitrage Fund Investment Objective: To generate income through arbitrage opportunities between cash and derivative market Investment Pattern: Type of instruments Asset allocation Asset allocation (Arbitrage available) (Arbitrage not available)Equity 65-90 0-65Derivatives (Futures & 65-90 0-65Options)Debt Securities & Money 10-35 35-100market instruments Benchmark Index: CRISIL Liquid Fund Index Tolani Institute of Management Studies
  29. 29. Cont… Benchmark Index: SENSEX Past performance: PERIOD Returns (%) Benchmark returns (%) Last 1 Year 7.80 6.21 Last 3 Years 6.48 6.22 Since Inception 6.89 6.28 Tolani Institute of Management Studies
  30. 30. HDFC Monthly Income Plan Investment Objective: To generate regular returns through investing in Debt & money market instruments Investment Pattern:  25% in Equity  75% in Debt & Money Market Instruments Benchmark Index: CRISIL MIP Blended Index Past performance: PERIOD Returns (%) Benchmark returns (%) Last 1 Year 9.11 6.17 Last 5 Years 11.06 7.41 Since Inception 12.18 7.09 Tolani Institute of Management Studies
  31. 31. THANK YOU Tolani Institute of Management Studies

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