Specialty funds

Specialty funds are a type of mutual fund that focuses their equity investing
within a specific industry or sector of the economy. Some specialty funds cover
broad sectors and others direct their investments on an industry group within
a sector.

Types of Mutual funds based on specialty

Sector Funds: These are funds that invest in a particular sector of the market
e.g. Infrastructure funds invest only in those instruments or companies that
relate to the infrastructure sector. Returns are tied to the performance of
the chosen sector. The risk involved in these schemes depends on the nature
of the sector.
Index Funds: These are funds that invest in instruments that represent a
particular index on an exchange so as to mirror the movement and returns of
the index e.g. buying shares representative of the BSE Sensex.
Fund of funds: These are funds that invest in other mutual funds and returns
depend on the performance of the target fund. These funds can also be
referred to as multi manager funds. These investments can be considered
relatively safe because the funds that investors invest in actually hold other
funds under them thereby adjusting for risk from any one fund.
International funds: These are also known as foreign funds and offer
investments in companies located in other parts of the world. These
companies could also be located in emerging economies. The only
companies that wont be invested in will be those located in the investors
own country.
Global funds: These are funds where the investment made by the fund can
be in a company in any part of the world. They are different from
international/foreign funds because in global funds, investments can be
made even the investor's own country.
Real estate funds: These are the funds that invest in companies that operate
in the real estate sectors. These funds can invest in realtors, builders,
property management companies and even in companies providing loans.
The investment in the real estate can be made at any stage, including
projects that are in the planning phase, partially completed and are actually
completed.
Market neutral funds: The reason that these funds are called market neutral
is that they dont invest in the markets directly. They invest in treasury bills,
ETFs and securities and try to target a fixed and steady growth.
 Inverse/leveraged funds: These are funds that operate unlike traditional
mutual funds. The earnings from these funds happen when the markets fall
and when markets do well these funds tend to go into loss. These are
generally meant only for those who are willing to incur massive losses but at
the same time can provide huge returns as well, as a result of the higher risk
they carry.
Asset allocation funds: The asset allocation fund comes in two variants, the
target date fund and the target allocation funds. In these funds, the portfolio
managers can adjust the allocated assets to achieve results. These funds split
the invested amounts and invest it in various instruments like bonds and
equity.
Gilt Funds: Gilt funds are mutual funds where the funds are invested in
government securities for a long term. Since they are invested in
government securities, they are virtually risk free and can be the ideal
investment to those who dont want to take risks.
Exchange traded funds: These are funds that are a mix of both open and
close ended mutual funds and are traded on the stock markets. These funds
are not actively managed, they are managed passively and can offer a lot of
liquidity. As a result of their being managed passively, they tend to have
lower service charges (entry/exit load) associated with them.

Mutual funds in India

The mutual fund industry in India started with the formation of the unit trust
of India under UTI act, 1963. Mutual fund gave good return to investors and
therefore in 1987-93, as the next logical step public sectors banks and financial
institutions were allowed to float mutual funds. SBI was first non-UTI fund set
up in 1987. During 1993-1996, the mutual fund industry was opened to private
sectors players.

Now commercial banks like Canara bank, Indian bank, bank of India and the
Punjab national bank etc. have entered in the field. LIC has also entered in this
field. These institutions have launched different varieties of schemes to meet
the different needs of investors. The UTI have introduced huge portfolio of
schemes like unit64, Mastergain, Mastershare etc.

There are also mutual funds with investment sourced abroad called offshore
funds. They have been established for attracting NRI investment to capital
market in India. The Indian fund unit scheme 1986 traded in London Stock
exchange and Indian Fund Unit Scheme 1988 traded in New York Stock
Exchange were floated by Unit Trust of India.

As far as mutual funds are concerned SEBI formulates policies and regulates
the mutual funds to protect the interest of the investors. SEBI notified
regulation for the mutual funds in 1993. The regulations were fully revised in
1996 and also in 2000. SEBI has also issued guidelines to the mutual funds
from time to time to protect the interest of investors.

On 22nd August, 1995, Association of Mutual funds in India (AMFI) was

incorporated. AMFI is an association of all Asset Management
Companies(AMC), Which has been registered with SEBI. All the AMCs which
have launched mutual fund schemes are its members. It functions under the
guidelines and supervision of its Board of Directors. Its objectives are to
maintain high professional and ethical standards, to recommend and promote
the top class business practises and code of conduct, to work as an interface
between Government of India, RBI and Mutual Fund Industry, to conduct
awareness programme, etc.

There has been steady increase in the share of mutual funds in household
saving. It has risen from 0.3 per cent in 1980-81 to 7 per cent in 1992-93 and
again decreased to less than two per cent in 2004-05. More international
mutual fund players have entered India like fidelity, Franklin Templeton
Mutual Fund etc.
Today, the industry has a range of products like money market funds, sectors-
specific funds, index funds, gilt funds, special category funds, insurance linked
funds, exchange traded funds etc.