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 Most appropriate for small investors and for
those who don’t have much knowledge.

 Investors need a financial intermediary who

provides the required knowledge and expertise.

 We see a larger amount of peoples savings

going into mutual funds.

 USA- birthplace of mutual funds, fund industry

has overtaken the banking industry.

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 1992- issue price of new equity shares was
controlled and low.

 Free pricing of shares was introduced.

 Stock markets were volatile

 Investors realized the need for careful

research and monitoring of the capital
markets.

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 In India Unit Trust Of India (UTI) occupied
the place of the capital markets
intermediary from 1963 until late 1987
when the Government started allowing
other sponsors also to set up mutual funds.

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CONCEPT OF MUTUAL FUNDS

Investors pool their savings

Money collected from

investors is invested in
shares, debentures and
other securities by the fund
manager

Fund manager realizes

gains and losses and
collects dividend or
interest

Any capital gains or losses

from such investments are
passed on to the investors
in proportion to the units
held by them FYBBI 01/04/10 6
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 An asset management company is a company that
deals in mutual fund investments.

 Is managed according to SEBI rules and regulations.

 Cannot undertake any other activity other than

portfolio management services.

 75% of unit holders can jointly terminate the

appointment of an AMC

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 The asset mix refers to the allocation of the
corpus of a scheme across three asset
categories namely:

STOCKS : BONDS : CASH

60 : 30 : 10

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 Market value of funds investment+
Receivables+Accrued Income-
Liablities-Accrued Expenses
NAV= -------------------------------
Number of units

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Name of scheme ABC
Size of scheme Rs 100crore
Face Value of Share Rs 10
Number of outstandingshare Rs 10crore
Market value of the funds investment Rs 180crore
Receivables Rs 1crore
Accrued Income Rs 1crore
Liablities Rs 0.5crore
Accrued Expenses Rs 0.5crore

NAV (180+1+1-0.5-0.5)/ 10=18.1

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 By Maturity:
• Open Ended- infinite life- enter/exit anytime
• Close Ended– redemption after period is over
 By Investment Objective:
• Equity Funds– only Stocks
• Debt Funds- only in Fixed Income Securities
• Money Market- short term money market
• Balanced/Hybrid Funds- Stocks+ Fixed Income
Securities
 Other Schemes:
• Tax Saving
• Special Schemes (ETF’s)

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 Portfolio diversification

 Professional management

 Reduction of risk

 Reduction of transaction costs

 Liquidity

 Convenience and flexibility

 Safety

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 No control over costs

 No tailor-made portfolios

 Managing a portfolio of funds

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LETS SWITCH OVER TO A CASE STUDY

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 The UTI act was passed by the Parliament in
1963.

 In 2001, when the markets crashed, people

started doubting UTI’s capacity to meet its
obligations towards investors.

 SEBI came into picture and took over UTI

Mutual Funds and the rest of the company was
taken over by the Government.

 The Government then slowly started selling its

stake to others out of which one is Axis Bank.

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 Entry Load has been removed from the mutual
fund market.

 Entry Load is the commission that an investor

has to pay while purchasing units of a mutual
fund.

 Recently the Sensex showed a 626 point fall

which caused Rs 7000 crore (nearly 4% of all
equity portfolios) to float in the market that
day.

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 Commission for brokers has gone from 2% to
0.05%.

 Entry Load has been removed from the mutual fund

market.

 Thus, there will be more inventors but a lesser

amount of brokers.

 Brokers will sell insurance rather than dealing in

mutual funds. Resulting in the growth of the
insurance industry.

 Hence, the near future of mutual funds looks dim.

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 MUTUAL FUND
INVESTMENTS ARE
SUBJECT TO MARKET
RISKS PLEASE READ THE
OFFER DOCUMENT
BEFORE INVESTING.

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