Presentation On Mutual Fund

MUTUAL
Presentation On
Mutual Fund
FUND
MANORANJAN PATRA
MEANING
Meaning:
 A mutual fund is an investment vehicle that pools the money of
several investors and invests it in different securities with the aim of
attractive yield and appreciation in their value.
 A mutual fund is a trust registered with SEBI that pools the

savings of a number of investors , who share a common financial
goal. The money is invested in varoius capital instruments such as
shares, debentures and other securities.
 A regulated investment company with a pool of assets that

regularly sells and redeems its shares. A mutual fund company may
be said as an ASSET MANAGEMENT COMPANY.
DEFINITION
 As per the (SEBI)Mutual Fund regulation, 1996 define ‘Mutual fund’
as a fund established in the form of a trust to raise monies through
the sale of units to the public under one or more schemes for
investing in securities, including money market instrument. So, a
mutual fund is a special type of institution, a trust or an investment
company which acts as an investment intermediary and channelises
the saving of large number of people to the corporate securities in
such a way that investors get steady returns, capital appreciation
and a low risk.
 As per Mutual Fund Book, published by investment company
institute of the U.S., “A Mutual Fund is a financial service
organization that receives money from investors, invests it and
earns returns on it.
Passed back to Pool their
money with
Generates Invest in
Types of Mutual Funds:
There are a number of mutual funds to suit the
needs and preferences of investors.
The various mutual funds may be classified under
five broad categories.
1)According to ownership.
2)According to the scheme of operation.
3)According to portfolio.
4)According to location
1. According to ownership:
According to ownership, mutual funds in India may be
classified as (1) Public sector Mutual funds and (2) Private
sector Mutual Funds.
Public sector mutual funds: Unit Trust of India(UTI) has been
functioning in the arena of Mutual fund business in India
since 1963-64.In 1987 that second fund was established in
India by the state bank of India.
Private sector mutual funds: Seeing the success and growth of
mutual funds in India capital market, the government of
India allowed the private sector corporates to join the
mutual fund industry on February 14.1992.
2.According to scheme of operation:
According to the scheme of operation, the mutual funds could be divided into
three categories, i.e. open ended funds, close ended funds and the interval
funds.
Open-Ended Scheme/Funds: open ended scheme means a scheme of mutual
funds which offers units for sale without specifying any duration for redemption.
These scheme do not have a fixed maturity and entry to the fund is always open
to investors who can subscribe it at any time.
Close-Ended Scheme/Funds: A close-ended scheme means any scheme of
mutual fund in which the period of maturity of the scheme is specified. The
maturity of close ended scheme is fixed and an investor can subscribe directly to
the scheme only at the time of initial issue. After the initial issue is closed, a
person can buy or sell the units of the scheme in the secondary market i.e the
stock exchanges where these are listed.
Interval Scheme/Funds: An interval scheme is a scheme of mutual fund which is
kept open for a specific interval and after that it operation as a close scheme.
Thus, it combines the features of both open ended as well as close ended.
3.According to portfolio:
Mutual funds can also be classified according to portfolio or the
objective of the fund. Some of these funds are discussed as follows.
Income funds. Balanced or conservative funds.

Growth funds. Money market mutual funds(MMMF).
Specialised funds Stock/Equity fund.
Leverage funds. Debt fund.
Taxation funds. Bond funds.
ELSS fund
Thematic fund
Sectoral funds
4.According to Location:
Mutual fund can also be classified on the basis of location
from where they mobilise funds, as:
Domestic funds: These are the funds which mobilise
savings of people within the country where investment
are made. Domestic funds can be sub-divided on the
basis of scheme of operation.
Off-shore funds: Off shore mutual funds are those which
raise or mobilise funds in countries other then where
investment are to be made. These funds attract foreign
savings for investment in India.
Advantages of Mutual Fund
Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries
and sectors. This diversification of investment ensures regular returns and capital
appreciation at reduced risk.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as
bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return
as they invest in a diversified basket of selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in
the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.
Liquidity
A peculiar advantage of a mutual fund is that investment made in its schemes can be
converted into cash without heavy expenditure on brokerage, delays, etc. According to the
regulation of SEBI, a mutual fund in India is required to ensure liquidity.
Transparency
Investors get regular information on the value of their investment in addition to disclosure
on the specific investments made by their scheme, the proportion invested in each class of
assets and the fund manager's investment strategy and outlook.
Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs
and convenience.
Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.
Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds
are regularly monitored by SEBI.
Problems of mutual fund in India
Lack of Innovation.
Inadequate Research.
Conventional pattern of investment.
No provision for performance guarantee.
Inadequate disclosures.
Delays in service.
No rural sector investment base.
Management of mutual funds
The mutual funds are bought and sold on the basis of units, and the investors are
called the unnitholders (as in the equity market, the investors are called
shareholders).
The governig body of mutual funds is SEBI.
When you invest in a mutual fund, you are buying units or portions of the mutual
fund and thus on investing becomes a shareholder or unit holder of the fund. The
investors profit and loss are determined as per the units of mutual funds they hold
as per the NAVs.
Unlike a stock price, NAV changes constantly according to the forces of supply
and demand, NAV is determined by the daily closing value of the underlying
securities in a fund's portfolio (total net assets) on a per share basis.
NAV = Net asset - Net liability….

No. of shares currently issued and outstanding
Net asset= Market value of funds investment + receivable + accrued income

Cont……….
SEBI has provided the 4 tier system for managning the MFs. The 4
constituents are-:
1.Sponsor - The sponsor initiates the idea to set up a mutual fund. It
could be a registered company, scheduled bank or financial
institution. A sponsor has to satisfy certain conditions, such as on
capital, track record (at least five years' operation in financial
services), default-free dealings and a general reputation of fairness.
2. Trust/board of trustees- The sponsor appoints the trustees.
Trustees hold the responsibility towards unitholders by protecting
their interests. Trustees check the market schemes, and secure
necessary approvals. They check if the AMC's investments are
within defined limits, whether the fund's assets are protected, and
also ensure that unitholders get their due returns
Cont……
3. Custodian- It is an independent organisation, which takes custody
of securities and other assets of a mutual fund. In public sector
mutual funds, the sponsor or trustee generally also acts as the
custodian.It's responsibilities include receipt and delivery of
securities, collecting income, distributing dividends, safekeeping of
units and segregating assets and settlements between schemes.
Custodians can service more than one fund.
4. Fund Managers/AMC- They are the ones who manage your
money. An AMC takes investment decisions, compensates
investors through dividends, maintains proper accounting and
information for pricing of units, calculates the NAV, and provides
information on listed schemes and secondary market unit
transactions. It also submits quarterly reports to the trustees. A
fund's AMC can neither act for any other fund nor undertake any
business other than asset management.
Cont…
Except the above following authorities are also related with
the management of MFs.
• Principal Underwriter-Sells fund shares, either directly to
the public or through other firms (such as broker dealers).
• Transfer Agent- Executes shareholder transactions,
maintains records of transactions and other shareholders'
account activities, and sends account statements and
other documents to shareholders.
• Independent Public Accountant- Certifies the fund's
financial statements
Rating of mutual funds
Mutual Fund is an investment that can either bring you great returns or leave you
extremely disappointed with very little to show in terms of returns. All these depend
on the fund you choose and the expertise of your fund manager. A mutual fund
scheme has to be selected after a careful consideration of all the factors that have
a potential influence on the fund.
It is very hard for one to choose from the plethora of mutual fund options available
in the market. In such cases, mutual fund ratings are the best way to identify the
right fund to suit your financial goals.
Mutual funds are rated on the basis of their past performances
Following are the mutual funds rating agencies --:
ICRA
CRISIL
MORNINGSTAR RATING AGENCY

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MUTUAL

 A mutual fund is a trust registered with SEBI that pools the

 A regulated investment company with a pool of assets that

Income funds. Balanced or conservative funds.

NAV = Net asset - Net liability….

Net asset= Market value of funds investment + receivable + accrued income

Mutual funds are rated on the basis of their past performances

Following are the mutual funds rating agencies --:

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