Mutual Fund Industry Study_final BE Ppt

8/8/2019 Mutual Fund Industry Study_final BE Ppt

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` Concept of a Mutual Fund (MF)` Operation of a MF

` Advantages and disadvantages

` Evolution of MF in India

` Structure of a MF

` Legal and regulatory framework

` Classification of MF

`

How to invest in MFs

Industry Study Mutual Funds 2


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A mutual fund is a pool of money collectedfrom investors and is invested according tostated investment objectives.



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No control over costs

No tailor-made portfolios

Managing a portfolio of funds



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Phase I -1964-87 : Growth of Unit Trust of India

UTI -only mutual fund during 1963-1988 -monopoly status

Governed by UTI Act, 1963

In 1984 investible funds corpus of UTI :-Rs 600 crore

By 1987-1988, assets under management of UTI :- Rs 6700

crore



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SBI Mutual Fund 1st Bank sponsored mutual

fundSEBI got regulatory powers in 1992

Assets under management increased to Rs

47,004 crore

UTI still had 80% market share



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Private sector players allowed to set up mutual

funds in 1993

Kothari Pioneer registered as the first private MF

house in the country

Encouraged competition



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SEBI Mutual fund regulations 1996

Deregulation and liberalization of Indian economy

impetus for growth

increased competition

SEBI and AMFI launched investor awareness programs

In 1999 dividends from mutual funds were made tax

exempt in the hands of investors



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Emergence of a large uniform industry

Creation of a level playing field



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Mergers and acquisitions-Birla Sun Life bought out AllianceCapital (2005), Infrastructure Development Finance CompanyLimited (IDFC) took over Standard Chartered AMC (2008)

International players-Fidelity, Franklin Templeton Mutual Fund.

As at the end of March 2008, there were 33 mutual funds,which managed assets of Rs. 5,05,152 crores under 956

schemes



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3-tier structure of Sponsor-Trustee-AMC.

Industry Study Mutual Funds17


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` Mutual funds are regulated by the SEBI (MutualFund) Regulations, 1996.

` Bank-sponsored mutual funds are jointly regulated

by SEBIand RBI.` Listed mutual funds are subject to the listing

regulations of stock exchanges.

` Association of Mutual funds India (AMFI )is an

industry association of mutual funds. (training,investor awareness)



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Net Asset Value is the market value of the assets ofthe scheme minus its liabilities.

The per unit NAV is the net asset value of the schemedivided by the number of units outstanding on thevaluation date

So if a fund had net assets of Rs.50 lakh and thereare one lakh shares of the fund, then the price pershare (orNAV) is Rs.50.00.

The NAV increases (or decreases) when the value ofthe mutual fund's holdings increase (or decrease).



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Types ofmutualfunds

MaturityPeriod

Openended

Closeended

Investmentobjectives

Load



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OPEN ENDED CLOSED ENDED

` Available for subscription allthrough the year.

` The corpus of open-ended

funds, changes everyday.

` Do not have a fixedmaturity.

` Repurchased at NAV

` Offers units for sale only inthe IPO. It is then listed onthe stock market.

` The corpus of a closed-endfund remains unchanged.

` Have a stipulated maturityperiod (2-15 years)

` Sell at a discount or premiumto NAV



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Loads:- charges imposed on investors to coverdistribution/sales/ marketing expenses

Load types

Front e

nd load orentry load

Back end load orexit load

Funds that make no such charges or loads

for sales expenses are called no load funds



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INVESTMENT

OBJECTIVES


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CONFUSED???


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Invest in equity shares

Objective -capital appreciation over the medium

to long-term

Returns are volatile since linked to the stockmarkets



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` Offer tax benefits to investors under section 80C

` Invest primarily in equities (90%)

` 3 year lock in period

` Encourage investment in equities



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Invest in the same pattern as popular marketindices like S&P CNXNifty Index/ SENSEX

Value of the index fund varies in proportion tothe benchmark index



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Invest in equity shares of companies in aparticular sector

Targeted at investors who are extremely bullishabout a particular sector



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` Invest in highly liquid money market instruments

` Short term



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` Invest both in equity shares and fixed-income-bearing instruments (debt)

` Steady return, reduce volatility, providing someupside for capital appreciation

` Ideal for medium- to long-term investors willing totake moderate risks



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` Invest in fixed-income-bearing instruments like bonds, debentures,government securities

` Best suited for the medium to long-term investors

`

Averse to risk and seek capital preservation` Provide regular income and safety to the investor



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` Invest in Central and State Government securities

` Give secured return and ensure safety of the principal

amount

` Best suited for the medium to long-term investors who

are averse to risk



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` OD -most important source of information for investors

` KIM is abridged version of the OD, available withapplication form

` Cover page contains details of scheme offered, names

of sponsor, trustee & AMC, mandatory disclaimer clauseof SEBI

` Closed end funds issue an offer document at the time ofthe IPO

` Open ended funds have to update OD at least once in 2years



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Identify your investment needs

Ch

oose th

e right Mutual fund

Select the ideal mix of schemes

Invest regularly

Start early

Industry Study Mutual Funds 38Continued


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` Create wealth, by investing as little as Rs. 500/-per month

` Disciplined Investing Approach

` Benefits of Compounding



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POWER OF COMPOUNDING


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` Indian mutual funds retail market, growing at a CAGR of

about 30%, is forecasted to reach US$ 300 Billion by

2015

` Income and growth schemes made up for majority of

Assets Under Management (AUM) in the country

` At about 84% (as on March 31, 2008), private sector

Asset Management Companies account for majority of

mutual fund sales in India



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THANK YOU


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Mutual Fund Industry Study_final BE Ppt