MUTUAL FUNDS IN

INDIA

What is a Mutual Fund?

Vehicle to mobilise capital from
investors, to invest in different markets
and securities, in line with the stated
objectives. Their role primarily to:
Assist investors in saving and generating

income
Helps governments, companies and other
entities to raise money for investment
purposes

Advantages
Professional Management
Affordable Portfolio Diversification
Economies of Scale
Liquidity
Tax Deferral
Convenient Options

Investment Comfort in subsequent purchases

Regulatory Comfort
Systematic Approaches to Investments (SIP, SWP, SWP)

Disadvantages
Lack of Portfolio Customization for small investors, though

there are Portfolio management Schemes (PMS)) for

large investors
Choice Overload
No control over costs

Mutual Fund History

First Phase: 1964-1987
UTI 1963 by Act of Parliament; Setup by RBI; in 1978 delinked from RBI
and took over IDBI; AUM 6,700 cr
Second Phase: 1987-1993 (Entry of Public Sector)
Mutual funds set up by public sector banks and LIC and GIC. SBI
Mutual Fund was the first non-UTI Mutual Fund. AUM 47,004 cr
Third Phase: 1993-2003 (Entry of Private Sector)
Entry of Private sector funds in 1993; SEBI (Mutual Fund) Regulations
1996
Fourth Phase: since Feb 2003
UTI 1963 repealed; bifurcated into UTI Mutual Fund and the Specified
Undertaking of the Unit Trust of India
https://www.amfiindia.com/research-information/mf-history

Broad Categories of MFs

Open ended funds/Closed ended funds/Interval funds
Active Funds/Passive Funds
Debt/Equity/Hybrid Funds
Debt Funds Gilt/Diversified/Junk/Fixed Maturity Plan/Floating rate
funds/liquid schemes
Equity Funds Diversified/Sector/Thematic Fund/Equity Linked
Saving Schemes (ELSS)/Equity Income or Dividend Yield
Schemes/Arbitrage Funds
Hybrid Funds Balanced Fund/Capital protected schemes
Gold Funds Gold Exchange Traded Fund/Gold Sector

Fund
Real Estate Funds yet to hit Indian market
Commodity Funds only commodity sector funds are
allowed and not commodity ETFs
International Funds

Industry Ecosystem
Mutual funds in India follow a three-tier system
Sponsors (First Tier)
Trust as per Indian Trusts Act, 1882 (Second Tier)
Asset Management Company (Third Tier)

Indian mutual fund industry at a glance (CII, 2014)

Association of Mutual Funds in India (2015)

More than 1 Trillion worth of AUM of the

43 AMCs, as on March, 2016
Name

Worth

HDFC Mutual Fund

1.761 Trillion

ICICI Prudential Fund

1.760 Trillion

Reliance Mutual Fund

1.59 Trillion

Birla Sun Life Mutual Fund

1.37 Trillion

SBI Mutual Fund

1.07 Trillion

UTI Mutual Fund

1.06 Trillion

ASSETS UNDER MANAGEMENT AS ON MAY 31, 2016

CATEGORY & TYPE WISE
Open Close Interval
End
End
Fund
INCOME
INFRASTRUCTURE DEBT
EQUITY
BALANCED

4,55,298 1,48,592
-

7,240

1,755

3,52,544 17,778

TOTAL

% to
Total

6,11,130 44.23%
1,755

0.13%

3,70,322 26.80%

2,69,746

GILT

15,352

15,352

1.11%

ELSS - EQUITY

41,792

2,973

44,765

3.24%

GOLD ETF

6,159

6,159

0.45%

OTHER ETFs
FUND OF FUNDS INVESTING
OVERSEAS

17,743

17,743

1.28%

1,958

1,958

0.14%

1,71,098

7,240

13,81,625

LIQUID/MONEY MARKET

Total

42,695

3.09%

42,695

2,69,746 19.52%

43 lakh new portfolios added in 2015-16

Road Ahead The game changers

MFs can be sold on e-platform with e-KYC

process
Demographic Shift towards Technology
Savvy Generation
Expected growth in HNIs
Financial literacy e.g. Jan-Dhan saving
accounts

Disinvestments
Sold MF business in India

Acquired by

Standard Chartered MF

IDFC

2008

DBS Chola

L&T Finance

2009

Benchmark Mututal Fund

Goldman Sachs Asset Management Co.

2011

Fidelity AMC

L&T Finance

2012

Daiwa MF

SBI MF

2013

Morgan Stanley

HDFC MF

2014

ING Mutual Fund

Birla Sunlife

2015

Pine-Bridge Mutual Fund

Kotak MF

2015

Deutsche Bank

Pramerica

2015

Goldman Sachs

Reliance Capital Asset Management (RCAM)

2015

JPMorgan Chase and Co.

Edelweiss Asset Management Ltd

2016

Why?

Inability to focus on distribution needs of retail investors;

Indian Banks cross selling

Focus on institutional business, yield lower margins
SEBI increased minimum Net worth from 10 crore to 50
crore; Sponsors reluctance
Cap on commission to agents, and thus they find insurance
products more lucrative
Bank FD interest more than 9%
No restrictions on redemption up to 2 lakhs and remaining
cant be restricted for more than 10 working days
Expense Ratio Cost Equity is 2.5% & 2.25% for debt
No Entry Load to be charged; Exit Load also limited to 7%
Employee Cost of Indian Fund houses is 20-25% whereas
50-60%

What are Fund Fact-Sheets?

A fund fact sheet is a document published on a monthly
basis by a fund house.

Reading a Fund Fact SheetEquity/Hybrid

Investment Information
AMC; Website; Registrar; Min Inv; Min SIP Inv (); Exchange Availability; Exit
Load
Objective and Investment Strategy
Fund Style: 3 x 3 Matrix ; Riskometer
Top Holdings and Portfolio Characteristics
Top Sector Weights
Asset Allocation: Distribution of investments between Equity, Debt

and Cash
Fund Performance vs. Index
History
NAV each year; Total Return; Expense Ratio

SIP Return (Annualized)

Expense Ratio
For Debt Funds: Additionally look at Rating profile of securities in the

portfolio

Maturity
Short

Medium

Long

Volatility
Low

Medium

High

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KIM, SID, and SAI