m Mutual funds : an introduction

m Industry overview
m Current trends
m Challenges faced
m Suggestions and solutions
m Marketing and sales of financial products
Concept:-
m Pool of savings by various investors sharing a
common financial goal.
m The money is collected and invested in different type
of securities depending on the objective.
m The income earned by these investments are shared
by its unit holders in to the number of units held by
them.
m Most suitable as an opportunity to invest in a
diversified ,professionally managed basket at nominal
cost.
m Have been a significant source of investment of govt.
and corporate securities.
2rief history &Structure:-
m UTI- 1st mutual fund of India set up 1963.
m Public sector banks and institutions allowed to set up
mutual funds in early 1990¶s.
m Policies formulated and regulated by SE2I for
promoters of all mutual funds (public/private/foreign).
m Set up in the form of trusts having sponsors, trustees,
AMC s and a custodian.
m Trustee holds the property for the benefit of the unit
holder.
m AMC¶s manage the investment of funds in various
types of securities.
m Custodian ,registered by SE2I holds the various
securities in its custody
m The trustee monitor the performance and compliance
of SE2I regulations by the mutual fund.
m Performance of a particular scheme denoted by
NAV(Net Asset Value)
m NAV is market value of securities held by the scheme.
m NAV = market value of securities of a scheme
Total number of unit of schemes
According to maturity:-
m Open ended: available for subscription on continuous
basis.
m Close ended: has a stipulated maturity period.
According to investment objectives:-
m Growth/ equity oriented: capital appreciation over long
term, relatively high risk.
m Income/ debt oriented: aim to provide steady income,
usually in bonds and debentures, low risk
m 2alanced fund: growth & fixed income, moderate risk.
m Money market of liquid fund: safer short term investment
like treasury bills interbank call money etc.
m Gilt fund: exclusively in govt. securities with no default risk.
m Index funds: replicate portfolio of a particular index like
2SE, NSE etc.
m Sector specific funds: as the name suggests invests in
securities of specific sectors.
m Tax saving schemes: offers TAX rebates to investors.
m Load & no load fund: load fund charges a percentage of
NAV for entry or exit no load whereas has no such charges.
m Mutual fund industry undergoing a stage of transformation.
m Post recession recovery has seen some major
restructuring in the industry.
m Strong GDP growth and rising number of HNI s provides a
huge potential of growth of investment.
m Growth in assets under management is has been
witnessing 28% growth CAGR*.
m After the tumble of 08, the markets are showing a steady
growth thereby indicating a bright future for the industry.
m The future of the mutual fund industry will be paved by the
performance by capital markets.
 






 













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m High ownership from institutional investors.
m Retail investors comprising 96 % in number terms and 37% in total AUM.
m Out of a population of1.15 bn only 42 million mutual fund accounts.
m Only 1.6% of people invest their saving into mutual funds.


m Relatively in nascent stage and competing with government fixed return schemes.
m Open ended funds dominate the industry with around 98% share.
m New emerging product line like Exchange Trading fund, Capital protection and overseas
fund.


m Major market shifting from metro and urban areas to tier 2 and tier 3 towns.
m Steady rise in contribution from small towns from 10% in 2005 to 20% in 2010






m Independent financial advisors
m National and international banks
m 2roking dealers.
m Low level of customer awareness
m Limited Focus on Increasing Retail
Penetration
m Limited Focus 2eyond the Top 20 Cities
m Limited Innovation in Product Offerings
m Low financial literacy levels
m Limited Flexibility in Fees and Pricing Structures.
m Limited Customer Engagement.
m Limited Focus of the Public Sector Network on
Distribution of Mutual funds.
m Multiple Regulatory Frameworks Governing
Financial Services Sectors.
m Heavy reliance on institutional sales
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m Creation of µMutual Fund Education Fund¶
m This Fund should be suitably ring-fenced and
managed/administered by the industry association.
m Promoting customer awareness programmes on mutual
funds.
m Effective and meaningful mass media campaigns.
m Financial planning awareness course in education
institutes.
m India post and PSU banks can help conducting customer
awareness.
m Self help voluntary groups like investors assosiations.
m Customer friendly products and product features.
m Allow investible surplus to be invested anytime in
the SIP.
m Introduction of simple products with higher returns
with less risk.
m Design women and children related needs.
m Focus on low income groups.
m Mutual fund investments through mobile telephone
and internet.
m Price flexibility.
m Proper training of PSU employee base.
m Mutual fund through post office, regional rural
banks, cooperative banks etc.
m Strengthening of AMFI associations.
m Increased investment in technology to support
distribution network.
m Explore the demand for
m Exchange Traded Funds (ETF¶s) especially gold
ETF¶s
m The annual composite rate of growth is expected
13.4% during the rest of the decade.
m 2004 it was Rs.150537 crore and end of the 2010
it would be Rs. 4090000 crore.
m Our saving rate is over 23%, highest in the world.
m SE2I allowing the MF's to launch commodity
mutual funds
m Mutual fund can penetrate rurals like the Indian
insurance industry