MUTUAL FUND MANAGEMENT

Semester - 4

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MANAGEMENT OF MUTUAL
FUND

COURES CURRICULUM
Module I: Basic Concepts
Overview - Introduction to Mutual Funds, Role, Types, Structure, Organization and Constituents.
Module II: Mutual fund Industry
History of mutual funds, Workflow in a mutual fund company
Module III: Legal and Regulatory Framework
SEBI guidelines, Offer Documents and Disclosure
Module IV: Marketing of mutual funds
Distribution, Marketing and Sales of Mutual Funds
Module V: Pricing of Mutual Funds
NAV Pricing, Accounting and Taxation.
Module VI: Investment Management
Managing Unit holders money, Portfolio management/ Fund Management and it's
Evaluation- Developing a Model Portfolio for the investor.
Module VII: Risk Analysis and Investor Services
Risks involved in mutual funds, performance evaluation, Unit holders Protection, Investor Services,
Financial Planning Strategies to investors and selecting the right products for Investments.

MAJOR PLAYER

AGENDA
Section 1: Nuts & Bolts

Section 5: Return Concepts

Concept & Role of Mutual Funds

Fund Structure and Constituents
Legal & Regulatory Framework

Measuring & Evaluating Mutual Fund

Performance

Section 2: Process of Investing

Helping Investors with Financial Planning

Offer Document
Fund Distribution & Sales Practices
Investor Services

Section 6: Financial Planning & Mutual

Funds
Recommending Financial Planning
Strategies

Section 3: Mutual Funds &

Securities Markets

Selecting the right Investment Products

Investment Management

Helping Investors understand risks

Section 4: Accounting Aspects

Recommending Model Portfolios and

Selecting the right fund

Accounting, Valuation and Taxation

Section 7: Business Ethics

Business Ethics & Mutual Funds

Section 1
Nuts and Bolts
1. Concept & Role of Mutual Funds
2. Fund Structure and Constituents
3. Legal & Regulatory Framework

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Concept of Mutual Fund

A pool of money contributed by many investors and
collectively managed by an asset management company
Investments made in accordance with stated objectives
A financial intermediary that allows small investors to
participate in the securities market
Ownership of the fund is mutual and beneficial
An investor becomes part owner of the funds assets
when he buys into the fund
The investor is allotted units for the amount subscribed.

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What it means
Investors
Receive
dividend/capital
appreciation

Contribute
money

Trust
(pool of money)
Receive
interest,
dividend or
capital growth

Invest in
markets

Markets
(volatile, has fluctuation)

The MF Cycle

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Characteristics

Investors own the mutual fund

Everyone else associated with the fund
earns a fee
Things which are mutual
Pool of money
Investment objective
Risk and return

Funds are invested in a portfolio of

marketable securities reflecting the
investment objective
Value of the portfolio and investors
holdings change with change in the
market value of investments.

Advantages

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Advantages of Mutual Funds

Portfolio diversification: It enables him to hold a diversified investment
portfolio even with a small amount of investment like Rs. 2000/-.
Professional management: The investment management skills, along
with the needed research into available investment options, ensure a
much better return as compared to what an investor can manage on his
own.
Reduction/Diversification of Risks: The potential losses are also
shared with other investors.

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Reduction of transaction costs: The investor has the

benefit of economies of scale; the funds pay lesser costs
because of larger volumes and it is passed on to the
investors.
Wide Choice to suit risk-return profile: Investors can
chose the fund based on their risk tolerance and
expected returns.

Advantages of Mutual Funds Cont.

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 closedended fund.
Convenience and Flexibility: Investors can easily transfer their
holdings from one scheme to other, get updated market information and
so on. Funds also offer additional benefits like regular investment and
regular withdrawal options.
Transparency: Fund gives regular information to its investors on the
value of the investments in addition to disclosure of portfolio held by their
scheme, the proportion invested in each class of assets and the fund
manager's investment strategy and outlook
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Disadvantages
No Control Over Costs
No Tailor Made
Portfolios
Managing a large
number of funds/types.

Disadvantages of Mutual Funds

No control over costs: The investor pays investment
management fees as long as he remains with the fund, even while
the value of his investments are declining. He also pays for funds
distribution charges which he would not incur in direct investments.
No tailor-made portfolios: The very high net-worth individuals or
large corporate investors may find this to be a constraint as they will
not be able to build their own portfolio of shares, bonds and other
securities.
Managing a portfolio of funds: Availability of a large number of
funds can actually mean too much choice for the investor. So, he
may again need advice on how to select a fund to achieve his
objectives.

Delay in redemption: It takes 3-6 days for redemption of the units

and the money to flow back into the investors account.
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History of Mutual Funds

Birthplace of Mutual Funds USA

(like the United States. As at the

end of March 2008, in the US alone there were 8,064 mutual funds with total
assets of about US$ 11.734 trillion (Rs.470 lakh crores)*.

History in India:
1964-1987 (Phase I) Growth of Unit Trust of India
1987-1993 (Phase II) Entry of Public Sector Funds
1993-1996 (Phase III) Emergence of Private Funds
1996-1999 (Phase IV) Growth and SEBI Regulation
1999-2004 (Phase V) Emergence of large & uniform
Industry
2004 onwards (Phase VI) Consolidation and Growth.

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BIRTH..
Historians are uncertain of the origins of investment funds; some cite the
closed-end investment companies launched in the Netherlands in 1822 by
King William I as the first mutual funds,
while others point to a Dutch merchant named Adriaan van Ketwich
whose investment trust created in 1774 may have given the king the idea.
Ketwich probably theorized that diversification would increase the appeal of
investments to smaller investors with minimal capital.
The name of Ketwich's fund, Eendragt Maakt Magt, translates to "unity
creates strength".

The next wave of near-mutual funds included an investment trust launched

in Switzerland in 1849, followed by similar vehicles created in Scotland in
the 1880s.

The idea of pooling resources and spreading risk using closed-end investments
soon took root in Great Britain and France, making its way to the United
States in the 1890s.
The Boston Personal Property Trust, formed in 1893, was the first closed-end
fund in the U.S.
The creation of the Alexander Fund in Philadelphia in 1907 was an important
step in the evolution toward what we know as the modern mutual fund.
The Alexander Fund featured semi-annual issues and allowed investors to
make withdrawals on demand.

ERA OF MODERN MF
The creation of the Massachusetts Investors' Trust in Boston, Massachusetts,
heralded the arrival of the modern mutual fund in 1924.
The fund went public in 1928, eventually spawning the mutual fund firm known
today as MFS Investment Management.
State Street Investors' Trust was the custodian of the Massachusetts Investors'
Trust.
Later, State Street Investors started its own fund in 1924 with Richard Paine,
Richard Saltonstall and Paul Cabot at the helm.
Saltonstall was also affiliated with Scudder, Stevens and Clark, an outfit that
would launch the first no-load fund in 1928.
A momentous year in the history of the mutual fund, 1928 also saw the launch of
the Wellington Fund, which was the first mutual fund to include stocks and bonds,
as opposed to direct merchant bank style of investments in business and trade.

TYPES OF FUND
Existing funds
Open-ended (OEF) & Closeended (CEF)
Growth, Income and Hybrid
Equity, Debt and Balance
Load & No-Load
Guaranteed & NonGuaranteed
Tax-exempt & Non taxexempt

New Gen Mutual Funds

Fund of Fund
Commodity fund
Real Estate fund
Asset Allocation fund
Exchange-traded fund
Derivative fund
Capital Protection Oriented
Fund.

LOADS & NO LOADS FUND

Load and No Load Funds: Funds that charge front-end (Entry), back-end (Exit)
or deferred (Contingent Deferred Sales Charge CDSC) loads are called load
funds.
Funds that make no such charges are called no-load funds.
In India, SEBI has defined a load as the one-time fee payable by the investor to
allow the fund to meet initial issue expenses including brokers commission,
advertising and marketing expenses etc.
As per SEBI definition ONLY those funds that charge an entry load are considered
as load funds.

OEF & CEF

Open Ended Fund

No fixed tenor
Continuous sale & purchase by
the fund
Subscription is not mandatory
Redemption mandatory, with
certain obvious conditions
Fund size changes everyday
No secondary market trading
Redemption pressure on fund
managers is higher
Daily NAV (calc & disclosure)

Close Ended Fund

Fixed tenor 1/3/5/7 years

Sale of units only during NFO
No subscription after closure of
NFO
Redemption in 2 ways
Exit window periodically
repurchase of units by the fund
Listing secondary market
trading of units, like stocks

Fund size either constant or

decreases
Lower redemption pressure on
fund managers
Weekly NAV (calc weekly but
disclosure daily).

Equity-oriented
Diversified
Sectoral
Thematic or Specialty
ASEAN fund, Infrastructure Fund
Growth & Value
Large, Mid & Small Cap
Dividend Yield or Equity Income
Index
ELSS
Primary objective: growth or capital appreciation.
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Contd.
Equity Funds: A fund that invests primarily in equity (ownership) instruments.
Equity Funds can be further classified as:
Diversified Equity Fund: investing in a mix of equity from different sectors
Index Funds: Portfolio replicates a selected Index
Sectoral Fund: invests in equity instruments of one sector for eg. Technology
Fund, Pharma Fund, Banking Fund etc.
Aggressive Growth Fund: target maximum capital appreciation, invest in less
researched or speculative shares
Growth Fund: This fund invests in equities of Growth companies only i.e. the
companies which have the potential to grow at higher rate in future

Large Cap/Mid Cap/Small Cap Fund: These Funds invests in equities of

Large/Mid/ Small Cap companies respectively.
Specialty (or Thematic) Funds: have a narrow portfolio orientation and invest in
companies that meet pre-defined criteria. Eg. Infrastructure Fund or ASEAN Fund
Equity Linked Saving Scheme (ELSS) an Indian Variant: Investment in these
schemes entitle the investor an income tax deduction u/s 80C (max Rs. 1 lakh in
year 2007-08). These are open-ended funds but investment in these schemes
(including the reinvested dividends) gets locked-in for a period of 3 years.
Value Funds: try to seek out fundamentally sound companies whose shares are
currently under-priced in the market. These fund add those shares to their portfolio
that are selling at low price-earnings ratios, low market to book value ratios and are
believed to be undervalued compared to their true potential.
Equity Income or Dividend Yield Funds: invest in stocks which have a high Div
Yield i.e., Div to Market Price ratio

Equity-oriented funds
PASSIVE
Index Funds

ACTIVE

DIVERSIFIED

NONDIVERSIFIED
SECTORAL

GROWTH

VALUE

Debt Oriented

Diversified Debt
Focussed/Sectoral Debt
Gilt Fund
Bond Fund
Fixed Maturity/Term Plan (FMP/FTP)
Liquid or Money Market MF

Primary objective: regular income.

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DEBT FUND Contd..

Debt Funds or (Income Funds): A fund can be classified as Debt Fund, which
invests primarily in Debt (loan) Securities. Debts fund can be further classified
as:
Gilt Funds: invests primarily in Govt Securities or Gilts (Govt. borrowing
programme)
Diversified Debt: invests in different varieties of Debt Securities i.e. say Govt
Securities, Corporate Debts, Securities of different Maturities etc.
Income fund: invests in Debt securities so as to provide regular income to
Investors.
Diversified Debt Fund: a fund that invests in all available types of debt securities issued by entities across all industries and sectors.

Focused Debt Fund: invest only in specified securities and thus have a higher
risk than diversified debt funds.

High Yield Debt Fund: seek to obtain higher interest returns by investing in
debt instruments that are considered below investment grade.

Assured Return Funds: an Indian variant, were being offered by erstwhile UTI
and now no longer offered.
Fixed Term Plan Funds: essentially close-end in nature and usually for term
less than a year. Being of short duration they are not listed on the stock
exchange. Invest in such securities whose residual maturity is equal to the
scheme tenor.

Balance
Investment in more than one asset class
Debt and equity in various proportions

Primary objective: hybrid (regular income as

well as capital appreciation).

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Fund of Funds
Invest in other schemes of same or other mutual fund
Is considered like a Debt scheme for tax purposes
2 advantages:
Since FOF is a mutual fund scheme, no tax on
income generated from buying and selling securities
Allows fund managers to rebalance portfolio freely
Investor need not to decide when to sell units and
execute transactions
Convenience to the investor.

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Commodity Fund
specialize in investing in different
commodities directly or through shares of
commodity companies or through
commodity futures contracts.
Example - Precious Metals Funds

As of date, Indian MF industry does not

have commodity funds except the ones
that invest in Gold.

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Real Estate Fund

Invest in real estate directly, or fund real estate
developers, or buy shares of housing finance companies
Fund to invest min 30 % corpus in real estate projects
Balance in equity, bonds/debentures of real estate cos.
Close-ended schemes with secondary market trading
Move to bring transparency, documentation and fair
valuation of property
Allow small investors with small investments to enjoy
upswing of property without downside of high stamp
duty, legal expenses, high initial investment, element of
black money and disposal at the right prices.

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Asset Allocation Fund

Fund manager has the flexibility to change
the allocation of funds between equity and
debt based on perception about direction
of the market.

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Exchange-traded fund
Passively managed fund that tracks a benchmark index
An ETF is like a hybrid financial instrument, a cross
between an index fund and a stock
An equity-based ETF would invest in a basket of
stocks that reflects the composition of an index, say
Nifty or Sensex
These funds are freely traded on the stock exchange
and derive value from the underlying asset, i.e.,
stocks.

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ETF Contd..
Exchange Traded Funds (ETFs) were first launched in India in December 2001
by Benchmark AMC. Now, a total of five ETFs are available to investors.
ETFs are fundamentally different from normal funds and have thus developed
something of a reputation for complexity.
While some of the details of how AMCs run ETFs are genuinely more complex,
that has nothing to do with investors. For the investors, ETFs are a straightforward
instrument that offers some interesting features. Let's see what makes ETFs
different.
ETF are index funds. An index fund is an equity fund, which tracks a particular
market index like the BSE Sensex or the Nifty.
The index fund holds the same stocks as the underlying index and in the same
proportion as the index. From an investment point of view, ETFs are simply index
funds thatunlike normal index fundscan be bought and sold at intra-day prices
throughout a trading day.

In this respect they are more like shares rather than like mutual funds. Normal
index funds are, of course, available only at end-of-day NAVs from fund
distributors like any other fund.
ETFs, since they need to be transacted upon throughout the day, are bought
and sold through stockbrokers (using a demat account) just like shares.
However, behind the scenes, ETFs are very different from any other kind of
fund. Where an ETF really differs from an index fund is the manner in which it is
created, bought and sold.
In the case of normal mutual funds investors pays cash to the fund, which in
turn buys the stocks and bonds which constitute the fund. When ETFs are first
set up the initial participants will give the fund the basket of stocks, which
constitute the underlying index and take units of the fund in exchange. These
market makers will in turn sell these units to investors just like a distributor
does. The market maker is usually a broker. Since ETFs are sold through
brokers, you will pay brokerage in place of loads. ETFs tend to have lower
brokerage than normal funds have loads.

The NAV of an ETF is a fraction of the value of the index. Thus the NAV of an
exchange-traded fund based on the Nifty can be one-tenth of the value of the
Nifty. If the Nifty is at 1500 points the NAV will be Rs 150.
Effectively, this fractional pricing means that a basket of stocks like the Nifty can
be purchased by an investor with a much lower outlay than it would otherwise
be possible.

Compare this with trying to replicate the index by purchasing individual shares,
where just one share of Infosys costs around Rs 4500. This also enables
smaller initial investments than what most index funds offer, which is specially
useful if you are just trying out index investing. By comparison, most nifty index
funds require a minimum investment of Rs 5000.
In the case of other mutual fund schemes the fund buys back and sells units. In
a way, an ETF resembles a close-end scheme, where the units are not sold
back to the fund and investors buy and sell the fund units on the market.

However, there is obviously no discount to NAV like closed end funds. Also,
unlike a close-end fund supply can be altered by creating additional units or
extinguished by withdrawing existing ones.
Trading of the units ensures that underlying stocks do not have to brought or
sold. Investors entering and exiting do not also affect existing investors. As a
result an ETF has a much lower tracking error than an index fund.
Currently the equity ETFs available track the BSE Sensex, the S&P CNX Nifty
and the S&P CNX Nifty Junior. The ETF on the Nifty Junior is in fact the only
option for passive investing in mid-cap shares. On the debt side a liquid ETF is
available.

Gold ETF
Gold ETFs invest in physical gold and
derive their value from the underlying
asset
The price of gold ETFs will be directly linked
to the price of gold itself and hence the
returns from a gold ETF will more or less
equal to returns from gold bars or coins

Investors can buy or sell units of these

schemes, like any other stock listed on the
exchange, through brokers.
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Derivative fund
Hedging
Futures
Options

Arbitraging
Stock Arbitrage
Index Arbitrage.

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Capital Protection Oriented fund

Close-ended with no exit option

Debt scheme from a tax standpoint
No guarantee by the AMC or sponsor
Capital protection on account of the structure
Eg. Debt component of 80 in zero coupon bonds
which give 100 on maturity and investment of the
balance 20 in equity
With tools such as dynamic portfolio insurance,
increase equity component by a multiplier
Rating of the scheme mandatory.

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Classification of funds
Risk

Sectoral funds have higher risk

Liquid or Money Market funds have least risk
Tenor

Equity funds require a long investment horizon

Liquid funds are for the short term liquidity needs
Investment objective

Equity funds suit growth objective

Debt funds suit income objective.
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Risk-Return Hierarchy
Return

Sectoral
funds
Equity
funds
Index
funds
Debt
Funds

Balanced
funds

Gilt
funds
ST debt
funds
Liquid
funds

Risk

Mutual Funds Vs. Other Investments

Product

Return

Safety

Liquidity

Tax
Benefit

Convenience

Bank
Deposit

Low

High

High

No

High

Equity
Instruments

High

Low

High or
Low

No

Moderate

Debentures

Moderate

Moderate

Low

No

Low

Fixed
Deposits by
Companies

Moderate

Low

Low

No

Moderate

Bonds

Moderate

Moderate

Moderate

Yes

Moderate

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Mutual Funds Vs. Other Investments

Product

Return

Safety

Liquidity

Tax
Benefit

Convenience

RBI Relief
Bonds

Moderate

High

Low

Yes

Moderate

PPF

Moderate

High

Low

Yes

Moderate

National
Saving
Certificate

Moderate

High

Low

Yes

Moderate

National
Saving
Scheme

Moderate

High

Low

Yes

Moderate

Monthly
Income
Scheme

Moderate

High

Low

Yes

Moderate

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Mutual Funds Vs.Other Investments

Product

Return

Safety

Liquidity

Tax
Benefit

Convenience

Life
Insurance

Moderate

High

Low

Yes

Moderate

Mutual
Funds
(Open-end)

Moderate

Moderate

High

No

High

Mutual
Funds
(Closedend)

Moderate

Moderate

High

Yes

High

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Mutual Fund
Structure &
Constituents

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MF Structure in other countries

Structure in USA
Management Company Similar to AMC
Underwriter for Sales
Management Group Similar to Sponsor
Custodian
Structure in UK
Open Ended - Unit Trusts regulated by Securities and
Investment Board + by relevant SRO
Closed Ended - Investment Trusts like a Company.

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Structure in USA
SHAREHOLDERS
BOARD OF DIRECTOR
Oversees the Funds activities

PRINCIPLE
UNDERWRITER

INVESTMENT ADVISOR
Manage Fund Portfolio
According to its Objective

CUSTODIAN
Holds funds assets,
manage them
separately to protect
shareholders interest

Sell Funds , Either Directly to the

Public or Through other firms.

INDEPENDENT
PUBLIC
ACCOUNTANT
Certifies funds
statements

TRANSFER AGENT
Maintain records of daily
transaction on behalf of
the company

MF Structure in India
A mutual fund has a 3-tier structure
Sponsor
Trustee

Trust
AMC

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MF Constituents in India
SEBI

Sponsor
Trustee

Trust
AMC

Custodian &
Depository

Banker

R&T Agent

Securities
Dealer /
Broker

Distributor

Investor

Securities
Markets

Trust
Mutual funds in India constituted as a Public Trust under
Indian Trust Act, 1882
The trust is registered with the Office of Public Trustee
OPT reports to the Charity Commissioner
The trust or the fund has no independent legal capacity
itself
Acts in relation to the trusts are taken on its behalf by the
trustees
Treated as a separate entity and a pass through vehicle
Has its own auditors, separate from the AMC.

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Sponsor
Promoter of the mutual fund

Creates a Trust under Indian Trusts Act, 1882 and

registers it with Office of Public Trustee
Appoints Board of trustees/trustee company

Creates AMC under Indian Companies Act, 1956

Fulfills necessary formalities and applies to SEBI for
registration of the Trust as a Mutual Fund.

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Sponsor Criteria
Min 5 years track record in financial services
Bank, corporate or an FI
Profit making in at least 3 out of past 5 years, including
the previous year
Positive Net Worth in last 5 years
At least 40% of the capital of the AMC
Net worth in the immediately preceding year more than
the capital contribution to the AMC.

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Trustee
Appointed by sponsor with SEBI approval

Have Registered ownership of investments

Formed either as Board of Trustees or Trustee
Company
Power to appoints all other constituents
Appoint AMC through the Investment
Management Agreement and delegate powers.

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Trustee Criteria
Minimum number of trustees is 4

2/3rd should be independent trustees i.e. no

connection of profit (what so ever) with the sponsor
Meet at least 4 times in a year to review functioning of
AMC
Trustees hold the unit-holders money in fiduciary
capacity

All major decisions need trustee approval

Right to seek regular information and take remedial
action.
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AMC
Required to be registered with SEBI

Appointed as Investment Manager of the mutual fund

Appointed by the trustees via an Investment Management
Agreement
Responsible for operational aspects of the mutual fund
Net Worth of at least Rs.10 crore OR US$ 20,00 at all times
At least 1/2 of the board members must be independent
Mostly, structured as a private limited company where Sponsor and
associates hold capital
Quarterly reporting to Trustees.

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AMC

MF Constituents
SEBI

Sponsor
Trustee

Trust
AMC

Custodian &
Depository

Banker

R&T Agent

Securities
Dealer /
Broker

Distributor

Investor

Securities
Markets

Custodian &
Depository
Banker

Other Constituents
Investment back-office
Providing bank accounts & remittance services

Securities
Dealer /
Broker

Purchase and sale of securities

Not more than 5% through a related
broker
Research report to AMC

R&T Agent

Investor records and transactions

Distributor

Selling & Distributing schemes

Role Restrictions
Sponsor of a fund cannot be its custodian

Sponsor of a fund can be a distributor

Trustee of one mutual fund cannot be trustee of another
mutual fund

Exception is Independent trustees provided they

obtain approval of both the board of trustees
Trustee of one fund cannot be AMC of another

AMC of one fund cannot be Trustee of another

AMC cannot have any business interest other than fund
advisory.
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Mergers & Takeovers

Scheme Merger
Scheme merged with another scheme of the same
AMC
AMC Takeover
AMC is taken over by another set of sponsors
AMC Merger
One AMC may merge with another AMC
Change of AMC/Trust
Trustees decide to change the AMC and handover
the scheme to a new AMC
Scheme Takeover
Just the schemes taken over by another set of
trustees.
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Mergers & Takeovers

Scheme takeover (HDFCZurich, Birla-Apple)
One AMC buys schemes of another AMC
Organic growth in assets
No change in AMC stakes
AMC merger (HB-Taurus)

Two AMCs merge

Similar to merger of companies
Sponsor stakes change
AMC take-over (Zurich-ITC Threadneedle, Birla-Alliance)
Stake of one sponsor in a AMC bought out by another
Change in AMC and sponsor.

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Mergers & Takeovers

Investor rights
Right to be informed
No prior approval required
Option to exit at NAV without exit load.

Regulatory framework
SEBI
Apex regulatory body
Equivalent to a Securities
and Investment Board in
the UK
Set up by an Act of
Parliament in 1992
Overall Capital Markets
Regulator
SEBI (MF) Regulations,
1996

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RBI
Apex Banking

regulatory body
MFs are investors in
Gilts & Money Market
and thus indirectly under
RBIs regulation
Regulates bank
assured return schemes
Bank sponsored AMC
wanting to offer assured
return scheme require
RBI approval as well.

Regulatory framework
MoF

Supervisor of both SEBI & RBI

Created in 2003

SAT

Provide apex appeal mechanism

for actions taken by SEBI

Companies
Act

Registration of AMC and

Trustee Company
RoC for Compliance
RoC is supervised by DCA
DCA is a part of CLB which is
under Ministry of Law and
Justice
CLB is the interface for
prosecution and penalties.

Regulatory framework
Office of Public
Trustee

SRO

Industry
Association
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Registration of Trust
Board of Trustees is accountable to
the OPT
Complaints against individual
trustees
Derive powers from regulator
Ability to make bye-laws
Regulate own members in a limited
way
Example : Stock exchanges NSE,
BSE etc.
Collective industry opinion
Guidelines &
recommendations
Example: Association of
Mutual Funds in India (AMFI).

Stop Check!
Q1. Mutual Funds in India are set up as
A) Company
B) Trust
C) Partnership
D) Association of persons

Q.2 Issuing additional fresh units and redeeming the existing units of a mutual
fund scheme is the role of:
A) The custodian
B) The transfer agent
C) The trustees
D) The bankers

Q.3 Minimum no of independent directors on the board of the AMC

A) 50%
B) 25%
C) 75%
D) None of the above.

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Stop Check!
Q.4 Which of the following qualifies as an Self Regulatory Organization :A) SEBI
B) RBI
C) NSE
D) AMFI

Q.5 To approve a change in fundamental attributes of a close-ended fund,

consent of the following is required:
A) 50% of unit holders
B) 50% of trustees
C) 75% of unit holders
D) None of the above

Q.6 The body to which an investor may address their complaint is:
A) SEBI
B) RBI
C) IRDA
D) NSE.

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Stop Check!
Q.7 A mutual fund is not
A) A company that manages an investment portfolio
B) A portfolio of stocks, bonds and other securities
C) A pool of funds used to purchase securities on behalf of investors
D) None of the above
Q.8 Which of the following mutual funds was not set up in the phase 1987-93:
A) Canara bank Mutual Fund
B) Kothari Pioneer Mutual Fund
C) SBI Mutual Fund
D) LIC Mutual Fund
Q.9 Which of the following has the lowest risk?
A) Liquid Fund (MMMF)
B) Gilt Fund
C) Diversified Debt fund
D) Diversified equity fund.
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