Mutual Funds Final (2)

8/4/2019 Mutual Funds Final (2)

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MUTUAL FUNDS

Presentation By:

Abhinav Lal, 3

Arun Pundir, 13

Divya Madar, 23

Mandhir Grewal, 33

Pushpinder Singh, 43



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Topics Covered

History of Mutual Funds. What are Mutual Funds.

Organization of a Mutual Funds.

Terminologies. Types of Mutual Fund Schemes. Regulations.

Advantages and Drawbacks of Mutual Funds.

Picking of fund. Performance of Mutual Funds in India. Summary.





Mutual Fund History - India

UTI commenced operations in July 1964.

Impetus for establishing formal institutionto increase the propensity of the middle &lower groups to save & invest.

Already existing companies foundeddifficult to raise fresh capital.

Investors didn’t respond adequately to

new issues.



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First Phase (1964-1987) -Growth of UTI

UTI constituted in 1963 by a special act of Parliament

Set up by Reserve Bank of India

In 1978, De-linked from RBI And IDBI

Unit Scheme 64 as First Scheme

At the end 1988, Rs.6700 Crores of Asset UnderManagement.



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Second Phase (1987-1993) -Entry of Public Sector Funds

First Non-UTI MF In June 1987 was SBI Mutual Fund

In 1993

, Mutual Fund Industry was open to privateplayers.

LIC established its Mutual Fund in December 1990

At the End of 1993, the Mutual Fund Industry had AssetsUnder Management of Rs. 47,004 Crores.



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Third Phase (1993-1996) -Emergence of Private Funds

Entry of Private Sector Funds.

First Private Sector MF in July 1993 was Kothari

Pioneer.(Now Merged with Franklin Templeton)

Function Under the SEBI (Mutual Fund) Regulations1996.

Entry of Foreign Mutual Funds.

At the End of 2003, the Mutual Fund Industry had AssetsUnder Management of Rs. 1,21,805 Crores.



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Fourth Phase ( 1996-1999) – Growth

and SEBI Regulation Implementation of new SEBI regulations led to rapid

growth.

Bank mutual funds were recast as per SEBI guidelines.

UTI came under voluntary SEBI supervision.

Dividends made tax free in 1999.

At the End of September 2004, there are 29Funds,which manage assets of Rs.1,53,108 croresunder 421 schemes.



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Phase 5 (1999-2004) – Emergence ofa large and uniform industry

UTI mutual fund came under SEBI’s regulations 1996.

Rapid growth, significant increase in corpus of privateplayers.

Tax break offered created arbitrage opportunities.

Bond funds and liquid funds registered highest growth



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Phase 6 – From 2004 onwards :Consolidation and Growth

Mergers and Acquisitions witnessed.

Steps taken by SEBI in 2005 – 06 Allowed MFs to invest in foreign securities like ADRs ( American

depository receipts) and GDRs ( Global Depository Receipts ).

Introduction of Gold Exchange Traded Funds (GETFs) and capitalprotection schemes

Real Estate Mutual Funds (REMF) : An entry into semi-urban andrural market.

E-commerce has facilitated easy access, lower intermediation costand better services for all .



Growth Of Mutual Funds – Over

the Years



GETTING STARTED

Basic understanding of Stocks & Bonds.

Stocks represent shares of ownership in a publiccompany.

Bonds are basically a chance for you to lendyour money to the government or a company.

There are many other types of investments otherthan stocks and bonds (including annuities, real

estate, and precious metals), but the majority ofmutual funds invest in stocks and/or bonds.



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What Are Mutual Funds? A Mutual Fund is a trust that pools the

savings of a number of investors whoshare a common financial goal.

The money thus collected is theninvested in capital market instrumentssuch as shares, debentures and othersecurities.

The income earned through theseinvestments and the capitalappreciation realised are shared by itsunit holders in proportion to the numberof units owned by them.



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Mutual Fund OperationFlow Chart





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Organisation of a Mutual Fund



Terminologies

ASSET ALLOCATION - Diversifying investments indifferent areas such as bonds stocks real estate, cash inorder to optimize risk.

FUND MANAGER - The individual responsible formaking portfolio decision for a mutual fund, in line withfund objective.

FUND OFFERED DOCUMENT - Document withinvestment objectives, risk factors, expenses summary,how to invest etc.

DIVIDEND - Profits given to the investor from time totime.

GROWTH - Profits plowed back into scheme. Thiscauses NAV.



NAV - Net Asset Value is the market value of theassets of the scheme minus its liabilities.

How is NAV calculated?The value of all the securities in the portfolio iscalculated daily. From this, all expenses arededucted and the resultant value divided by the

number of units in the fund is the fund’s NAV.

LOAD - Some AMCs have sales charges, orloads, on their funds (entry load and/or exit load)

to compensate for distribution costs. Funds thatcan be purchased without a sales charge arecalled no-load funds.



Entry Load/Front-End Load (0-2.25%) - Thecommission charged at the time of buying thefund.

To cover costs for selling, processing.

Exit Load/Back- End Load (0.25-2.25%) -

The commission or charge paid when aninvestor exits from a mutual fund. Imposed todiscourage withdrawals

May reduce to zero as holding period increases.



Sale Price/ Offer Price - Price you pay to investin a scheme. May include a sales load. (In this

case, sale price is higher than NAV)

Re-Purchase Price/ Bid Price - Price at whichclose-ended scheme repurchases its units.

Redemption Price - Is the price at which open-ended schemes repurchase their units and

close-ended schemes redeem their units onmaturity.





Type of Funds, as per Structure …

Open-ended

1. Free to Sale/Purchase on a Daily basis.2. No fixed maturity.3. Schemes not Listed on a Stock Exchange.

1. Sale during IPO.2. Fixed Maturity.3. Schemes Listed on a Stock Exchange.

Closed-ended



Type of Funds, as per InvestmentObjective…

Growth Funds

1. Capital appreciation of Equity Shares .2. Companies with high growth potential .3. For e.g. Morgan Stanley Growth Fund .

Income/Debt

Funds

1. Providing safety of investments andregular income.

2. High dividend payouts.3. For e.g. Templeton Income Fund.

Balanced Funds

1. Modest risk of investment and reasonablerate of return .

2. Regular Income and Capital appreciation.3. For e.g. GIC Balanced Fund.



Type of Funds, as per Investment Type…

Money Market/

Liquid fund

1. Invest in Short Term Securities.2. Less Than One year Securities.3. Include Treasury Bills, Commercial

Papers etc.





REGULATIONS

Governed by SEBI (Mutual Fund) Regulation 1996.

All MFs registered with it, constituted as trusts ( underIndian Trusts Act, 1882).

Bank operated MFs supervised by RBI too.

AMC registered as Companies registered underCompanies Act, 1956.

SEBI- Very detailed guidelines for disclosures in offerdocument, offer period, investment guidelines etc.

NAV to be declared everyday for open-ended, everyweek for closed ended.

Disclose on website, AMFI, newspapers.

Half-yearly results, annual reports.

Select Benchmark depending on scheme and compare.



Advantages of Mutual Funds

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Portfolio Diversification

Reduction of Risk

Tax Benefits

Convenience & Flexibility

Liquidity

Professional Management

Reduction of Transaction Costs



DIVERSIFICATION

One Stock- No Diversification Many Stocks (Mutual Fund)- Diversification



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Drawbacks

1. No Guarantee

2. Costs.

3. Management Risk.

4. No tailor made portfolios.

5. Dilution.6. Taxes.



Picking Of Fund

Buying - by contacting the fund companiesdirectly. Other funds are sold through brokers,banks, financial planners, or insurance agents.

Selling a fund is as easy as purchasing one. Allmutual funds will redeem (buy back) your shareson any business day.

The Value of Your Fund - You can basically justthink of NAV per share as the price of a mutualfund.



Investment Strategies

Systematic Investment Plan (SIP) - Invest afixed sum every month. (6 months to 10 years-through post-dated cheques or Direct Debit

facilities)

Systematic Transfer Plan (STP) - Invest in debtoriented fund and give instructions to transfer afixed sum, at a fixed interval, to an equityscheme of the same mutual fund.



Performance of Funds in India

100% growth in the last 6 years.

Number of foreign AMC's are in the queue toenter the Indian markets.

Our saving rate is over 23%, highest in theworld. Only channelizing these savings in mutualfunds sector is required.

We have approximately 29 mutual funds whichis much less than US having more than 800.



BEST



BESTRANK FUND NAME RETURNS

(%)

NAV

(Rs.)

1. Reliance Diversified PowerSector Retail

49.82 62.73

2. Taurus Libra Taxshield 42.52 27.42

3. DWS Investment Opportunity 40.34 35.17

4. Standard Chartered PremierEquity

34.42 20.84

5. Reliance Regular SavingsEquity

32.59 22.08

6. ICICI Prudential Infrastructure

Inst I

32.13 14.31

7. ICICI Prudential Infrastructure 31.05 26.97

8. DBS Chola Oppurtunities 30.91 39.05

9. Magnum COMMA 28.79 21.74

10. BoB Growth 27.96 41.88

WORST



WORSTRANK FUND NAME RETURNS

(%)

NAV

(Rs.)

1. UTI Growth Sector Fund – Software - G

-22.43 21.2

2. Kotak Tech. Fund -22.15 8.17

3. SBI Magnum Sector Umbrella –

Infotech Fund

-18.94 20.28

4. UTI Thematic Auto Sector Fund – G

-17.05 14.59

5. JM Short Term Fund – Institutional Plan – G

-17.03 10.63

6. ICICI Prudential TechnologyFund - G

-15.92 13.74

7. LIC MF Unit Linked InsuranceScheme

-14.96 9.62

8. Franklin Infotech Fund – G -13.2 44.87

WORST



WORSTRANK FUND NAME RETURNS

(%)

NAV

(Rs.)

9. JM Auto Sector Fund - G -12.61 18.64

10. Kotak Lifestyle Fund – G -11.78 11.62



Summary

A mutual fund brings together a group of people andinvests their money in stocks, bonds, and othersecurities.

The advantages of mutual funds are professionalmanagement, diversification, economies of scale,simplicity and liquidity.

The disadvantages of mutual funds are high costs, over-diversification, possible tax consequences, and theinability of management to guarantee a superior return.

There are many, many types of mutual funds. You canclassify funds based on asset class, investing strategy,region, etc.

http://www.investopedia.com/terms/m/mutualfund.asp

http://www.investopedia.com/terms/d/diversification.asp

http://www.investopedia.com/terms/e/economiesofscale.asp

http://www.investopedia.com/terms/e/economiesofscale.asp

http://www.investopedia.com/terms/d/diversification.asp

http://www.investopedia.com/terms/m/mutualfund.asp



Costs can be broken down into ongoing fees

(represented by the expense ratio) and transaction fees(loads).

The biggest problems with mutual funds are their costsand fees.

Mutual funds are easy to buy and sell. You can eitherbuy them directly from the fund company or through athird party.

Mutual fund ads can be very deceiving.

http://www.investopedia.com/terms/e/expenseratio.asp

http://www.investopedia.com/terms/l/loadfund.asp

http://www.investopedia.com/terms/l/loadfund.asp

http://www.investopedia.com/terms/e/expenseratio.asp



Websites

http://news.moneycontrol.com/mf/glossary.php

http://www.investopedia.com/university/mutualfunds/default.asp

http://www.valueresearchonline.com

http://www.amfiindia.com/

http://www.sbimf.com/portal/static/calculator/RiskAssess/RiskAssessCal1.asp

http://www.mutualfundsindia.com/resourcecentre.asp





THANK YOU

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Mutual Funds Final (2)