The document discusses the constituents and structure of mutual funds. It describes the key parties involved - investors who contribute funds, sponsors who set up the fund, asset management companies that manage the fund's assets, trustees who ensure investors' interests are protected, distributors who bring in investors, registrars who maintain records of investors, and custodians who hold the fund's securities. It also outlines different types of mutual fund schemes and provides a brief history of mutual funds in the Philippines, comparing them to other major financial institutions like commercial banks, securities firms, and insurance companies.

1. Mutual Funds:
Structure and Constituents
FME 6
November 5, 2022

2. Learning Outcomes
At the end of the lesson, the students will be able
to discuss the following:
1. The constituents and structure of mutual funds
2. The mutual funds in the Philippines
3. The difference between Mutual Fund and other
major financial institutions

3. Constituents and Structure of
Mutual Funds

4. Parties to Mutual Funds

5. Mutual fund is a solution for investors who
lack the time, the inclination or the skills to
actively manage their investment risk in
individual securities. They delegate this role to
the mutual fund, while retaining the right and
the obligation to monitor their investments in
the scheme.
Investors

6. Sponsor is the company, which sets up the
Mutual Fund as per the provisions laid down
by the Securities and Exchange Commission.
SEC mainly fixes the criteria of sponsors based
on sufficient experience, net worth, and past
track record.
Sponsors

7. ➔ manages the funds of the various schemes
➔ comes out with new schemes periodically
➔ plays a key role in the running of mutual fund
➔ operates under the supervision and guidance of the
trustees
➔ income comes from management fees
◆ calculated as a percentage of net assets
managed
Asset Management Company (AMC)

8. Guidelines for the formation of AMC:
a. Headed by an independent non-interested and nonexecutive chairman
b. Managing director and other executive staff should be full time
employees
c. 50% of the board of trees should be outside directors who are not
connected with the bank
d. BOD shall not be entitled to any remuneration other than the sitting
fees
e. AMC will not be permitted to conduct other activities such as merchant
banking or issue management
Asset Management Company (AMC)

9. ➔ important link in the working of any mutual fund
➔ responsible for ensuring that investors’ interests in
a scheme are taken of properly
◆ constant monitoring of the operations of the
various schemes
◆ paid trustee fees, which are charged to the
scheme
Trustees

10. ➔ Earn a commission for bringing investors
into the schemes
◆ Commission is an expense
Distributors earn a commission from the
AMC.
Distributors

11. Depending on the financial and physical resource at their
disposal, the distributors could be:
a. Tier 1 distributors who have their own or franchised
network reaching out to investors all across the country
b. Tier 2 distributors who are generally regional players
with some reach within their region
c. Tier 3 distributors who are small and marginal players
with limited reach
Distributors

12. ➔ tracks investor’s holdings in mutual fund
schemes
➔ Registrar and Transfer Agent (R & T)
➔ maintains an account of investors’
investments and disinvestment from the
schemes
Registrars

13. ➔ Maintains custody of the securities in which
the scheme invests
➔ Ensures an ongoing independent record of
the investment of the scheme
Custodian/Depository

14. Types of Mutual Fund Schemes

15. Types of Mutual Funds Schemes

16. Brief History of Mutual Funds in
the Philippines

17. Comparison of Major Financial
Institutions

18. Institutions
Commercial Bank Mutual Fund
● Accepts both demand and time deposits
● Offers interest-earning savings accounts against which
checks can be written
● Offers money market deposits accounts, which pay interest
at rates competitive with other short-term investment
vehicles
● Makes loans directly to borrowers or through the financial
market.
● Pools funds of savers and makes them available to business
and government demanders
● Obtains funds through sales of shares and uses proceeds to
acquire bonds and stocks.
● Creates a diversified and professionally managed portfolio of
securities to achieve a specified investment objective
● Thousand of funds, with variety of investment objectives
● Money market funds provide competitive returns with very
high liquidity
Securities Firm Insurance Company
● Provides investment banking services by helping firms to
obtain funds
● Provides brokerage services to facilitate the sales of existing
securities
● The largest type of financial intermediary handling individual
savings
● Receives premium payments and places these funds in loans
or investments to cover future benefit payments
● Lends funds to individuals, businesses, and government or
channels them through the financial markets

19. Thank You!
“And my God will supply every need of yours according to
his riches in glory in Christ Jesus.” - Philippians 4:19