MUTUAL FUNDS Services and Products Unit 14 Mbfs

7/31/2019 MUTUAL FUNDS Services and Products Unit 14 Mbfs

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Unit 14

MUTUAL FUND SERVICESAND PRODUCTS


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A typical MF in India has the following constituents

Fund Sponsor

Mutual Fund

Trustees

Asset Management Company


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Fund Sponsor

A sponsor is a person who establishes a

MF. It obtains the certificate of registration

as a MF from SEBI. He is similar to thepromoter of a company.

Contributes at least 40% of the net worth of

AMC


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Mutual Fund

A MF is constituted in the form of a trust

under the Indian Trust Act, 1882.

The fund invites investors to contribute

their money in the common pool, by

subscribing to units issued by various

schemes established by the trust. The assets of the trust are held by the trustee

for the benefit of unit holders.


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Trustees

The MF or trust can either be managed by

the Board of Trustees, which is a body of

individuals, or b a Trust Company, which isa corporate body.


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Asset Management Company

The AMC, appointed by the sponsor or the

Trustees and approved by SEBI, acts like

the investment manager of the trust.


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Working of a Mutual Fund

FUND

MANAGEMENT

SECURITIES

RETURNS

INVESTORS Pool their money with

Invest inGenerate

Passed back toINVESTORS GET A

BLEND OF LIQUIDITY

RETURNS & SAFETY

INVEST IN

BALANCED

PORTFOLIO

PORTFOLIO

YIELDS HIGH

RETURN TO MFs

MUTUAL FUND

LARGE CORPORATE

SPECIALISTS MANAGE


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Type of

Mutual FundSchemes

StructureInvestmentObjective

SpecialSchemes

Open EndedFunds

Close EndedFunds

Interval Funds

Growth Funds

Income Funds

Balanced Funds

Money MarketFunds

Industry SpecificSchemes

IndexSchemes

SectoralSchemes

TYPES OF MUTUAL FUNDS


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MUTUAL FUNDSOPEN ENDED

OPEN FOR ALL THE YEAR MIN SUBS AMT 50CR

NO DURATION

REFUNDED IF MIN SUBS NOT

ACHIEVED

REPURCHASED ANY TIME

REDEEMED AT NAV & LOAD

FACTOR RANGES (4% TO 6%)

AS REPURCHSED SO NOT

LISTED AT STOCK EX

TRADED AS PERMITTED LOT

DIVID MAY /MAY NOT

SWITCHOVER ALLOWED

CLOSE ENDED

OPEN FOR FIXED PERIOD MIN SUBS AMT 20CR

DURATION (5TO7 YEARS)

REFUNDED IF MIN AMT

NOT ACHIEVED MAY BE REPURCHASED

(AFTER 2 TO 3 YRS)

REDEMPTION SPECIFIED &

DONE AT NAV - SERVICECHARGE

LISTED AT STOCK EX

DIVID MAY/MAY NOT BE

SWITCHOVER ALLOWED


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Income/ Debt oriented funds

Provide regular and steady income to investors.

Generally invest in fixed income securities such as

corporate debentures, government securities, and

money market instruments

Less risky compared to equity schemes


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Sector funds

Investment strategy is focused on a particular sector such

as pharmaceuticals, software, FMCG etc, which is likely to

grow at a faster rate in the near/immediate future

Invest in the companies of such a particular sector.

The examples are

UTI Software Fund

Franklin FMCG Fund Pru ICICI FMCG Fund


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Index funds

Mirror a market index, like Nifty or Sensex.

Invest in all the stocks that comprise a particular index in

proportions equal to the weightage of those stocks in the

index.

Passively managed funds.

Appropriate for conservative long term investors looking

at moderate risk, moderate return arising out of a well-

diversified portfolio.

Performance is generally similar to that of their benchmark

indices.


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Index funds and the base index

Index funds Base index

IDBI Principal

Franklin India Index Tax Fund

Franklin India Index FundUTI Nifty Fund

Pioneer ITI Index Fund

India Access Fund

Magnum Index Fund

UTI Master Index

S&P CNX Nifty

S&P CNX Nifty

S&P CNX NiftyS&P CNX Nifty

S&P CNX Nifty

S&P CNX Nifty

S&P CNX Nifty

BSE Sensex


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MMMF

Invest exclusively in safer short-term

instruments such as T/Bs, CDs, CP and inter

bank call money, government securities,etc.

Appropriate for corporate and individual

investors as a means to park their surplusfunds for short periods.


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Gilt Funds & Venture capital Funds

Gilt Funds

Invest exclusively in government securities which

have no default risk.

Venture capital Funds

Invest in unlisted companies, start-up business,

new technologies.

Risk is very high. Return is also very high.

Provide tax benefit to the investors.


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Fund of Funds

Invest in other mutual funds which are performing well.

Suitable for cautious investors who want to minimize risks.

Kotak Equity Fund of Funds (FoFs), Indians only FoFsthat invests in other AMCs funds.

Can invest up to 25% in its core equity fund Kotak 30, and

the rest can be invested in other top performing funds.


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MUTUAL FUND INDUSTRYKEY FINANCIALS

NAV= M.V OF FUNDS INVESTS+REC+ACCRUED INCOME-LIABILITIES-ACCRUED EXP

NO. OF SHARES OR UNITS OUTSTANDING

RATE OF RETURN= NAV AT END-NAV AT BEGINNING +

DIVIDEND PAIDNAV AT BEGINNING

INITIAL EXPENSES: CEILING OF 6%

RECURRING EXPENSES: MAX 3% OF AV

NET ASSETS IN A YEAR

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MUTUAL FUNDS Services and Products Unit 14 Mbfs