Professional Documents
Culture Documents
1. Open-ended Funds
2. Closed-ended Funds
3. Interval Funds
By Investment Objective:
1. Growth Funds
2. Income Funds
3. Balanced Funds
5. Load Funds
6. No-Load Funds
OTHER SCHEMES
• Wide Choice to suit risk-return profile: Investors can chose the fund
based on their risk tolerance and expected returns.
Advantages of Mutual Funds
• Liquidity: Investors may be unable to sell shares directly, easily and
quickly. When they invest in mutual funds, they can cash their investment
any time by selling the units to the fund if it is open-ended and get the
intrinsic value. Investors can sell the units in the market if it is closed-
ended fund.
Trustees
Asset Management
Company
Depository Agent
Custodian
Fund Sponsor
The Fund Sponsor
• Any person or corporate body that establishes the Fund
and registers it with SEBI.
• Form a Trust and appoint a Board of Trustees.
• Appoints Custodian and Asset Management Company
either directly or through Trust, in accordance with SEBI
regulations.
Depositories
• Indian capital markets are moving away from physical
certificates for securities to ‘dematerialized’ form with a
Depository.
• Will hold the dematerialized security holdings of the Mutual
Fund.
Distribution Channels
Mutual Funds are primary vehicles for large collective investments,
working on the principle of pooling funds.
A substantial portion of the investments happen at the retail level.
Agents and distributors are a vital link between the mutual funds and
investors.
Agents
- Is a broker between the fund and the investor and acts on behalf of the
principal.
- He is not exclusive to the fund and also sells other financial services.
This in a way helps him to act as a financial advisor.
Distribution Companies
- Is a company which sells mutual funds on behalf of the fund.
- It has several employees or sub-broker under it.
- It manages distribution for several funds and receives commission for its
services.
Distribution Channels
Banks and NBFCs
- Several banks, particularly private and foreign banks are
involved in a fund distribution by providing similar services like
that of distribution companies.
- They work on commission basis.
Direct Marketing
- Mutual funds sell their own products through their sales
officers and employees of the AMC.
- This channel is normally used to mobilize funds from high
net worth individuals and institutional investors.
Sales Practices
Agent Commissions
- No rules prescribed for governing the maximum or minimum
commissions payable by a fund to its agents.
- As per SEBI regulations, 1996 all initial expenses including
brokerage charges paid to agents cannot exceed 6% of
resources raised under the scheme.
- Excess distribution charges have to be borne by the AMC.
- A no-load fund is authorized to charge the schemes with the
commissions paid to agents as part of the regular
management and marketing expenses allowed by SEBI.