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Mutual Funds-B.V.Raghunandan


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formation of mutual funds, types, calculation of NAV and mutual fund vis-a-vis exchange traded fund

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Mutual Funds-B.V.Raghunandan

  1. 1. Mutual Funds<br />Chapter 11<br />
  2. 2. Meaning and Definition<br />Praveen N. Shroff defines a Mutual Fund as, ”a portfolio of stock market shares and other financial instruments built with funds collected from small investors, whose primary concern is security of investment” <br />
  3. 3. Formation and Management<br />Established under Indian Trust Act, 1882<br />Registered under Securities Exchange Board of India (Mutual Funds Regulations), 1996<br />Promoter is called the Sponsor<br />Sponsor appoints a Board of Trustees<br />Board of Trustees enter into an agreement with an Asset Management Company and a Custodian<br />
  4. 4. Parties to a Mutual Fund<br />A. Sponsor<br />B. Trustees<br />C. Asset Management Company<br />D. Custodians<br />Other Functionaries<br />
  5. 5. A. Sponsor: Activities/Functions<br />Promotion<br />Appointment of Board of Trustees<br />Track Record of Operating in Financial Markets for the last five years<br />At least 3 years of profit making<br />Should contribute a minimum of 40% of capital of Asset management Company<br />
  6. 6. B. Trustees<br />Board of Trustee is in charge of day to day management through the powers obtained from the Trust Deed executed by the Sponsor<br />Protection of Interest of Investors<br />Appointment of others like Custodian, Asset Management Company and Other Functionaries<br />Supervision of AMC<br />AMC should obtain the permission of Board of Trustees before Launching any new Scheme<br />
  7. 7. C. Asset Management Company: Features<br />Registered as a Private Limited Company<br />Registered with SEBI<br />Capital Provided by Sponsors, Associates and Joint Venture Partners<br />Rs.10 Crore , Minimum Networth<br />AMC for only one Fund<br />AMC can not undertake any other business<br />AMC signing an Investment Management Agreement with the Trustees<br />A Fee is charged<br />All Operational Decisions are made by an AMC<br />
  8. 8. D. Custodian<br />Maintaining Securities in the Physical Form<br />Operate the Demat Account for the shares received in the Electronic Form<br />Ensuring that the securities bought by AMC are credited to the Demat Account<br />Issue the Delivery Order for the securities sold<br />Receive Dividend and interest on the Investment<br />Responding to Corporate Action as per the instruction of the AMC<br />
  9. 9. Other Functionaries<br />Registrar & Transfer Agents<br />Brokers<br />Selling Agents & Distributors<br />Depository Participant<br />Bankers<br />Legal Advisors<br />Auditors<br />
  10. 10. Types of Mutual Funds<br />A. Classification on the Basis of Structure<br />B. Classification on the Basis of Investment Objectives<br />
  11. 11. A. Classification on the Basis of Objectives<br />Open-End Schemes<br />Close-Ended Scheme<br />Interval Scheme<br />
  12. 12. B. Classification on the Basis of Investment Objectives<br />Growth Scheme<br />Income Scheme<br />Balanced Scheme<br />ELSS<br />Index Fund<br />Gilt Funds<br />MMMF<br />Fund of Funds<br />Contra Fund<br />Inverse Index Fund<br />Emerging Opportunities Fund<br />Theme Funds<br />Other Funds<br />
  13. 13. Net Asset Value<br />NAV= Market Value of Investment<br /> + Current Assets<br /> + Other assets<br /> + Accrued Income<br /> - Current Liabilities<br /> - Other Liabilities<br /> - Accrued Expenses<br />
  14. 14. Benefits of Mutual Funds<br />Suitability for Small Investors<br />Risk Management<br />For Corporates, Lesser Administrative Expenses<br />Investor Education<br />Investment Research<br />Liquidity of Stock Market<br />Development of Money Market<br />Savings Mobilisation<br />
  15. 15. Mutual Fund & Exchange Traded Fund<br />Mutual Fund<br />ETF<br />1.Investor pays cash<br />2.Less Trading Expenses<br />3. No cash in Hand<br />4.Close-Ended are Listed<br />5. Portfolio Flexibility<br />6. NAV at regular interval<br />1.Investor may pay cash or surrender underlying asset<br />2. More Trading Expenses<br />3. A lot of cash in hand<br />4. All Schemes are listed<br />5. Fixed Portfolio<br />6. Continuous Valuation<br />
  16. 16. Mutual Funds in India<br />Unit Trust of India<br />Banks<br />Term Lending Institutions<br />Insurance Companies<br />Private Sector<br />Foreign Funds<br />
  17. 17. THANK YOU<br />