Professional Documents
Culture Documents
C. Private Sector 2. Foreign - AIG Global Asset Management Company (India) Pvt. Ltd. - BNP Paribas Asset Management India Private Limited - FIL Fund Management Private Limited - Franklin Templeton Asset Management (India) Private Limited - Goldman Sachs Asset Management (India) Private Limited - Mirae Asset Global Investments (India) Pvt. Limited - Pramerica Asset Managers Private Limited
Terminology
Asset Allocation Diversifying investments in different assets such as stocks, bonds, real estate, cash in order to optimize risk. Fund Manager The individual responsible for making portfolio decision for a mutual fund, in line with funds objective. Fund Offer Document Document with investment objectives, risk factors, expenses summary, how to invest etc Dividend Profits given to the investor from time to time. Growth Profits ploughed back into scheme. This causes the NAV to rise. NAV Market value of assets of scheme minus its liabilities.
Terminology
Entry Load/Front-End Load The commission charged at the time of buying the fund. To cover costs for selling, processing Exit Load/Back- End Load The commission or charge paid when an investor exits from a mutual fund. Imposed to discourage withdrawals May reduce to zero as holding period increases. Sale Price/ Offer Price Price you pay to invest in a scheme. May include a sales load. (In this case, sale price is higher than NAV) Re-Purchase Price/ Bid Price Price at which close-ended scheme repurchases its units Redemption Price Price at which open-ended scheme repurchases its units
They are traded at NAV related prices. The corpus keeps on changing. The unit capital is not fixed but variable. Any time redemptions always allowed, except when there is lock in period.
They are traded at a discount to NAV. The corpus of closed ended funds remains unchanged. The unit capital is fixed, one time sale. Redemption of Units on expiry date
Ideal For
Investors in their prime earning years. Investors seeking growth over long term.
Low return
High return
Equity Funds
Diversified equity funds Index funds Value funds Mid-cap funds Equity-linked savings schemes(ELSS) Sector funds like Auto, Health Care, FMCG etc Dividend Yield Funds Others (Exchange traded funds etc)
Debt Funds
Corporate Bond funds Gilt funds Floating rate funds Bond index funds
Mutual Funds vs Other Investments What does one look for while investing Safety Regulatory Framework Return Absolute/Inflation adjusted Liquidity Tax Savings Future Financial Planning Ease of Management
Fund Structure
Fund Structure
A mutual is set up in the form of a trust which has (i) Sponsor (ii) Trustees (iii) Asset Management Company (AMC) (iv) Custodian The sponsors set up the trust as promoters The trustees hold the property in trust for the benefit of the unitholders. unitholders . They are vested with general powers of superintendence and direction over the AMC and they monitor their performance and compliance with the SEBI regulations. The AMC manages the funds. The custodian holds the securities of the fund in its custody.
Fund Structure
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The instrument of trust should be in the form of a deed duly registered and executed by the sponsor in favour of the trustees under the Indian Registration Act, 1908. The contents of the trust deed have been prescribed by the SEBI.
Sponsor
Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund.
Trustees
The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. The main responsibility of the trustees is to safeguard the interest of the unit holders and inter alia ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes.
Appointment of Trustees
A person can be appointed as a trustee on the fulfilment of the prescribed conditions, such as that he should be a person of ability, integrity and standing, who has not been guilty of moral turpitude/ convicted of any economic offence/violation of any securities laws TwoTwo-thirds of the trustees of a mutual fund must be independent persons and not associated with the sponsors in any manner manner. . The trustees should enter into an investment management agreement with the AMC for the purpose of making investments investments. . The trustees would have the right to obtain from the AMC, all information concerning the operations of the various schemes of the mutual fund managed by it it. .
The sponsor of the mutual fund/trustees would appoint the AMC, with the prior approval of the SEBI. Its appointment can be terminated by a majority of trustees or 75 per cent of the unitholders of the scheme. The eligibility criteria for the appointment of an AMC include sound track record, adequate professional experience, not guilty of moral turpitude, nonnon-conviction for any economic offence/violation of any securities laws, inclusion of 50 per cent independent directors and net worth of at least Rs. 10 crore crore. .
An AMC cannot act as a trustee of a mutual fund It can undertake other business activities in the nature of portfolio management services, management and advisory services to offshore funds/ pension funds/provident funds/ venture capital funds, management of insurance funds, financial consultancy and exchange of research on a commercial basis, if any of these activities do not conflict with the activities of the mutual fund fund. .
It is obligatory for an AMC to take all reasonable steps and exercise due diligence to ensure that the investment of funds conforms to the provisions of the SEBI regulations and the trust deed deed. . It can purchase/sell securities upto a maximum of 5 per cent of the total, through a broker associated with the promoter. promoter . It is required to disclose details of all transactions with/through the sponsor/associate companies companies. . The AMC has to file details of securities transactions by its key personnel in their own name or on behalf of the AMC, to the trustees/SEBI trustees/SEBI. .