A mutual fund is a financial intermediary that pools the savings of investors for collective investment in a diversified portfolio of securities. A fund is mutual as all of its returns, minus its expenses, are shared by the funds investors.
Definition
a fund established in the form of a trust
to raise money through the sale of units to the public or a section of the public under one or more schemes, for investing in securities, including money market instruments or gold or gold related instruments or real estate assets
Advantages
Professional management Portfolio diversification Reduction in transaction cost Liquidity
Convenience Flexibility Protection of interest of investors Promoting, industrial development of the country
The Sponsor The Mutual Fund trust The Asset Management Company Other Administrative Entities
Sponsor
The sponsor is similar to the promoter of a company as he gets the fund registered with the SEBI. Criterias required are Sound track and general reputation for minimum 5 years Not have been found of guilty of fraud
He forms trust and appoints a board of trustees Also appoints AMC as fund managers And appoints a custodian to hold the fund assets. The sponsored is required to contribute at least 40% of the min net worth of the asset management company
contd
A mutual fund in India is constituted in the form of a public trust created under the Indian Trusts Act,1882. The trust is formed by sponsor and registerd with SEBI The fund sponsors act as the settler of the trust, contributes to initial capital and appoints trustees
Collected funds are managed by board of trustees,who are independent body and acts as a protector of the unit holders interest. At least 2/3 of the trustees are independent trustees eg: HDFC Trustee Company Limited for HDFC mutual fund
AMC is a company formed and registered under companies act,1956. They charge a fee for the service rendered to mutual fund trust. Investment manager Manages the different investment schemes as per the SEBI regulation and the trust deed. AMC should be registered with the SEBI Net worth of atleast Rs.10 crore the form of cash
Most AMCs in India are private limited companies Eg:HDFC asset management company limited for HDFC mutual fund
FIXEDD DEPOSITS Investment for a fixed period Assured return on fixed deposits
MUTUAL FUND SCHEMES No fixed tenure in open ended schemes No assurance for either returns of capital growth High returns
Low returns
Equity fund
Income
Domestic
Debt fund
Growth
Off shore
Interval schemes
Hybrid fund
Balanced
Functional classification
Open-ended schemes Close-ended schemes Interval schemes
Portfolio classification
Income funds Growth funds Balanced funds
Geographical classification
Domestic funds Off shore funds
Investment classification
Equity fund Debt fund Hybrid fund
Investment classification
Equity fund Diversified Value Special Sectoral Derivatives arbritage Tax savings
Debt funds Money market mutual funds Short term bond Long term Gilt Floating maturity plans Fixed maturity plans Capital protection Schemes
Other classification
P/E ratio fund Exchange traded funds Gold exchange traded funds Real estate mutual funds
Conclusion
In India, mutual funds have a potential to grow. Mutual fund companies have to create and market innovative products and frame distinct marketing strategies. They have coma a long way, but a lot more can be done.
Bibliography
Info: THE INDIAN FINANCIAL SYSTEM
by Bharati V Pathak
Images: Google
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