Concept of MF and ETF, how MF works, structure of MF (sponsors, trustees, custodian, asset management company, agent), how to invest in a MF, history of MF, advantages and disadvantages of MF, MF schemes, things to be considered while selecting a MF scheme, ETF's- structure of ETF, advantages and disadvantages, difference between a MF and a ETF

1. PROJECT ON MF AND ETF
Presenter Names | Basheer, Dipti, Saurabh, Santhanam

2. AGENDA
 What are MF & how they work.
 Structure.
 History of MF.
 Advantages & Disadvantages of MF.
 Schemes of MF.
 Things to be considered while selecting the MF scheme.
 ETF- structure, advantages, diff b/w ETF & MF, ETF in India, factors driving their
growth.

6. SPONSOR
 Akin to the Promoter of the Fund.
 Contributor of the minimum 40% of the fund’s AUM.
 Gets it registered with the SEBI.
 Forms a trust & appoints Boards of Trustees.

7. TRUSTEES
 Hold the asset on the behalf of the unit holder.
 Two third of the trustees must be Independent ( not associate with the
sponsor).
 Ensures that the system, process and the personnel are in place.
 Resolves unit holder’s GRIEVANCES.
 Appoint the Custodian & AMC, ensures that all the activities are done
according to the SEBI regulations.

8. ASSET MANAGEMENT CONPANY (AMC)
 Floats schemes after receiving the prior approval from the Trustees & the
SEBI.
 Cannot undertake any other business activity other than portfolio management
services.
 75% unit holders can jointly terminate the appointment of AUM.
 At least 50% of independent directors.
 Chairman of the AMC cannot be a trustee of any other MF.

9. CUSTODIAN
 Holds the fund’s securities in safekeeping.
 Settles securities transactions for the fund.
 Collects the interest & dividend paid on securities.
 Records information on corporate actions which affect the share price like M&A.
AGENT
 Sells units on the behalf on the fund.
 It can be a Bank or NBFC, Individual

10. HOWTO INVEST
 LUMPSUM AMOUNT: The total amount of scheme is given in one time by the
investor to the MF.
 SYSTEMATIC INVESTMENT PLAN (SIP): Involves a FIXED SUM of
money in a specific scheme , on a regular basis, for a pre- determined number of
period.
Benefit of RUPEE COST AVERAGING.

12. FIRST PHASE- 1964 -87
 UTI was set up by the Parliament in 1963 under UTI ACT and was given monopoly.
 1st scheme launched by UTI was BY UTI scheme in 1964.
 At the end of 1988, UTI had INR 6700 cr of AUM.
 SECOND PHASE: 1987- 93 ( ENTRY OF PUBLIC SECTOR)
 Introduction of public sector mutual funds like SBI MF, LIC MFPNB MF etc.
 At the end of 1993, MF industry had 47,004 cr of AUM.

13. THRID PHASE: 1993 – 2003
 Introduction of Private sector funds.
 First MF regulation came into existence.
 Implementation of new SEBI Regulations.
 Rapid asset growth.
 UTI came under the SEBI supervision.
FOURTH PHASE: SINCE 2003
 Investors friendly measures were taken by the SEBI to protect the investors & to
enhance the investor’s return through Tax benefits.

14. ADVANTAGES

17. Things to be considered while selecting a mutual fund
scheme
 Standard Deviation:
It is the measure of dispersion of returns from the mean returns. It is used to
measure the RISK. Lower it is, better it is.
 Beta:
It is a measure of systematic risk (which cannot be avoided by
diversification). Lower it is, better it is.

18.  Sharpe Ratio:
It is a measure for calculating risk adjusted return. It is the reward for taking
per unit of risk.
SR= Rp-Rf
SD

19.  Sortino Ratio:
It is the measure of calculating return per unit of downside risk. (i.e.) only the
negative deviation.
SR = Rp-Rf
SD(Downside)
 Note: SD(downside): Negative or left sided deviations from the mean.

20.  Alpha(α):
Extra return over and above the return for risk taking. It is basically the fund
managers skills to produce excess returns by selecting good investment tools.
Higher it is, better it is.

21. EXCHANGETRADED FUNDS (ETF)
 An ETF, or exchange traded fund, is a marketable security that tracks an index,
a commodity, bonds, or a basket of assets like an index fund.
 ETFs experience price changes throughout the day as they are bought and sold.
 ETFs typically have higher daily liquidity and lower fees than mutual fund shares,
making them an attractive alternative for individual investors.
 ETF units are made of two components –portfolio deposit and cash components .
 ETF’s can either be held as an investments or sold in the secondary markets.
 Investors can also redeem ETF units in exchange of underlying securities but not in
cash

22. ADVANTAGES
 Buy and sell just like a share.
 Minimum trading lot is just one unit.
 Provides diversification.
 Lower management cost then index funds, since they are listed in exchange and
hence their sales and redemption are much lower.
 Traded throughout the day in stock exchange, hence better than open ended mutual
funds which are traded at days closing NAV and AMC’s.
 Arbitrage in future and cash market.
 Buy and sell at real time price .