PRESENTATION ON MUTUAL FUNDS

MADE BY:
ANSHUL GUPTA ANKIT GUPTA MOHIT JAIN PRASHANT PRIYADARSHI PRATEEK MISHRA RAHUL SHARMA

MUTUAL FUNDS
A mutual fund is a financial intermediary that allows a group of investors to pool their money together with a predetermined objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. when you invest in a mutual fund, you are buying shares of the mutual fund and become a shareholder of the fund. Investment may be diversified to spread risk and maximize returns.

FEATURES OF MUTUAL FUNDS

Mutual fund is a pool of financial resources. Mutual funds are professionally managed.

Mutual fund is an indirect investment.

Mutual fund is not a borrowing - lending relationship. Mutual fund is a representative of investors.

BENEFITS OF MUTUAL FUNDS

Investment is done under the supervision of professionals and experts. Investor has the liquidity. He can dispose his funds whenever he requires the funds. Mutual funds offer different types of schemes. Operations and working of mutual funds are regulated, supervised and controlled by a lot of statutory provisions.

REGULATIONS OF MUTUAL FUNDS IN INDIA

Sponsor - sound track record - reputation of fairness and integrity - must contribute at least 40% of net worth of AMC MF is constituted in form of trust. Two-third independent Trustees and not be associated with sponsor Trust periodically review investors complaints and shall redressed by AMC MF appoint custodian to carry out custodial services and sponsor or associates have less than 50% share capital of custodian. Scheme adv. Shall be conformity with Advertisement Code. Close-ended scheme may be converted into open-ended scheme.

 MF can enter into underwriting agreement. No guaranteed return in scheme. Money collected in scheme shall be invested in transactional securities in money market or capital market or private placed debts or securitized debts. Scheme funds not to be used in option trading or carry forward transaction. Every close-ended scheme listed on stock exchange. Over-subscription case of scheme, preference given to applicants applying for upto 5,000 units. Wounding up of open-ended scheme after expiration of fixed period.

 MF shall not borrow money except for temporary liquidity needs In open-ended scheme, repurchase and sale price published at least once a week Unquoted debt instruments not exceed 10% in growth funds and 40% in income funds MF permitted to participate in Securities Lending Scheme of SEBI MF allowed to invest in ADRs/GDRs Issued by Indian companies. MF issued several guidelines in respect of advertisements. Prescribed guidelines for valuation of investments.

NET ASSET VALUE (NAV)

Net asset value is the market value of the assets of the scheme minus its liabilities.

NAV = Value of securities Liabilities No. of unit outstanding

SYSTEMATIC INVESTMENT PLAN (SIP)

It is not a mutual fund, rather it is method of investing in a mutual fund. An investor invests in a mutual fund scheme, a prespecified amount at pre-specified intervals. Based on the principle of cost-averaging.

BENEFITS OF A SIP
Power of compounding by investing now. Cost Averaging. Convenience. Disciplined Investment

SYSTEMATIC WITHDRAWL PLAN (SWP)

A facility provided by a mutual fund to its unit holders to withdraw money from a scheme on a regular basis. 2 options: 1.Fixed withdrawal. 2.Appreciation withdrawal.

SYSTEMATIC TRANSFER PLAN (STP)

A plan in which an investor invests a lump sum amount in one scheme and regularly transfers a pre-defined amount in another scheme. Two types: 1. Fixed plan. 2. Capital appreciation.

MUTUAL FUND SCHEMES

Open-ended and close-ended mutual fund schemes
Gilt funds
Load and No-load funds Equity funds schemes Tax-saving schemes

 Balanced funds
Income fund and Growth fund Exchange traded funds (ETFs)

COSTS AND LOADS IN MUTUAL FUND INVESTMENTS

Operating expenses: Costs incurred in respect of management of portfolio of assets on behalf of investors.

Expense ratio= total annual operating expenses average assets under management

Loads: Difference between NAV and Purchase/Sale price of units. a) Entry loadPayable at the time of purchase of units by the investor. b) Exit loadMutual funds may charge an exit load from the investor at time of repurchase of units. Repurchase price is less than NAV.

HOW IS MUTUAL FUND SET UP

A mutual fund is set up in the form of trust, which has: SPONSOR TRUSTEE CUSTODIAN ASSET MANAGEMENT COMPANY(AMC)

WHO ARE SPONSORS

The mutual fund itself is a trust registered under the Indian Trust Act, and is initiated by a sponsor. The sponsor is a person who acts alone with another corporate to establish a mutual fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and other functions pertaining to the fund.

ROLE OF SPONSOR
Sponsor is a person who sets up a Mutual fund. Sponsors settle the Trust and execute Trust Deed.

Sponsors contributes to the initial capital of the trust.

Sponsor appoints the Board of Trustees. Sponsor appoints AMC.

WHO ARE TRUSTEES

The trustees are vested with the general powers of superintendent and directions over AMC. They monitor the performance and compliance of SEBI regulations by the mutual fund.SEBI regulations require that at least two third of the directions of trustee company or board of trustee must be independent i.e they should not be associated with the sponsor.

BOARD OF TRUSTEES & ROLE

Trustees appointed by the Sponsor with SEBI approval.

At least two third Trustees must be independent.

Trustees oversee the functioning of AMC. Trustees approves each MF scheme floated by AMC. The investments in mutual fund are held by Trustees. Trustees receive fees for their services.

CUSTODIAN
A trust company, bank or similar financial institution responsible for holding and safeguarding the securities owned within a mutual fund. A mutual funds custodian may act as mutual funds transfer agent, maintaining record of shareholders transactions and balances. Since mutual funds are essentially a large pool of funds from many different investors, it requires a third party custodian to hold and safeguard the securities that are mutually owned by the fund investors.

ASSET MANAGEMENT COMPANY

A firm that invest the pooled funds of retail investors in securities in line with the stated investment objectives,for a fee, The investment company provides more diversification,liquidity & professional service that are normally available to individual investors.

ROLE OF AN AMC
AMC is the fund manager for managing Mutual Fund Assets AMC floats Different Mutual Fund Schemes AMC is accountable to Trustees AMC charges Asset Management fees subject to ceiling prescribed by SEBI Asset Management agreement between AMC and TRUSTEES.

CAP Ceiling on Expenses charged on Debt/Equity

The NFO(New Fund Offer) expenses are one-time in nature, with a ceiling of 6% (of net assets), and as per SEBI guidelines are to be amortised over 5 years. The AMC is not permitted to charge over 2.50% (for the first Rs 1,000 m or Rs 100 crores) to the fund. There are well-defined expenses and net assets guideline formulated by SEBI

Average weekly Net Assets

Net Assets
First Rs 1,000 m

% limit
2.50%

Next Rs 3,000 m
Next Rs 3,000 m

2.25%
2.00%

Over Rs 7,000 m

1.75%

OFFER DOCUMENT
Offer document of a MF scheme is like a Prospectus issued by AMC inviting Public to units of MF scheme.

Discloses adequate information for investors to take informed investment decisions.

CONTENTS OF OFFER DOCUMENTS

Name and address of the mutual fund asset management company, lead managers ,registrars, transfer agents and custodian. Declaration of associated risk as requires by SEBI. Investment objectives, policies and limitations. Details about rate of spread. Target amount, issued price, minimum subscription, market loss, date of opening and closing, basis of allotment and listing and transfer of the units. Details of issue expenses and other expenses.

THANK YOU