Presentation on:

Mutual Funds

By- Ankit Trivedi

Registration nO-11012397
Roll No B50

Indian Institute of Capital Markets

 Snapshot….

Mutual Fund

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Indian Institute of Capital Markets
 Why did Mutual Funds come into existence?

An old Axiom :

“It is not wise to put all eggs into

one basket”

……… was probably in the minds of

those who formed the first mutual fund.
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Introduction

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AThe moneyFund
Mutual
thus
is a collected
trust that
is then invested
pools the
in capital
savings
market of a
numbers
instruments of
investors
such as who
shares,a
share
debentures and
common
other
financial goal
securities.

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 Contents

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Flow Cycle of a Mutual Fund

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Flow Cycle of a Mutual Fund

Mutual Funds defined….a flow cycle

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 Flow Cycle explained…

• The income earned through these investments and the capital

appreciation realized are shared by its unit holders in
proportion to the number of units owned by them.

• Thus a Mutual Fund is the most suitable investment for the

common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a
relatively low cost.

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 Diff. b/w MF and Direct Investment

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Diff. b/w MF and Direct Investment

Mutual fund investing vs. Direct investing

• Professional investment management
• Risk reduction through diversification
• Convenience
• Availability of alternative portfolio objectives
• Unit holders’ account administration and services

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 Balance sheet of a Bank and Mutual Fund

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Difference b/w Balance Sheets of MF and Bank

Difference between Bank and Mutual Fund

Mutual Fund Balance Sheet Bank Balance Sheet
Liabilities Assets Liabilities Assets
Unit Capital Investment in Share Capital Loans and
Financial  Deposits Advances
Securities

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 Effect on Indian Economy

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Effect on Indian Economy

• With progressive liberalization of economic policies, there has been a

rapid growth of capital market, money market and financial services
industry including merchant banking, leasing and venture capital.
Consistent with this evolution of the financial sector, the mutual fund
industry has also come to occupy an important place.

• The mutual fund attracts foreign capital flow in the country and secure
profitable investment avenues abroad for domestic savings through the
opening of off shore funds in various foreign investors

• By investing in market the economy gets boosted by having capital to run

business instead of borrowing from others so domestic funds help to
circulate money in a healthy way.

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 Steps to Invest in Mutual Fund

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Portfolio Risk
Management What Mutual
Process Management Funds are not?

Indian Institute of Capital Markets

 Steps to Invest in Mutual Fund

• Mutual funds normally come out with an advertisement in newspapers publishing

the date of launch of the new schemes. Investors can also contact the agents and
distributors of mutual funds who are spread all over the country for necessary
information and application forms. Forms can be deposited with mutual funds
through the agents and distributors who provide such services. Now a days, the
post offices and banks also distribute the units of mutual funds. However, the
investors may please note that the mutual funds schemes being marketed by
banks and post offices should not be taken as their own schemes and no assurance
of returns is given by them. The only role of banks and post offices is to help in
distribution of mutual funds schemes to the investors.

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 Risk-return structure of schemes

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Risk-return structure of schemes

Risk –Return of different schemes

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 History of Mutual Funds in India

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 History of Mutual Funds in India

Phases of Mutual Fund Industry in India

1964

1987

1993

2009  ?

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 Regulatory Aspects

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Regulatory Aspects

Regulations
• Governed by SEBI (Mutual Fund) Regulation 1996
– All MFs registered with it, constituted as trusts ( under Indian Trusts
Act, 1882)
• Bank operated MFs supervised by RBI too
• AMC registered as Companies registered under Companies Act, 1956
• SEBI- Very detailed guidelines for disclosures in offer document, offer
period, investment guidelines etc.
– NAV to be declared everyday for open-ended, every week for closed
ended
– Disclose on website, AMFI, newspapers
– Half-yearly results, annual reports
– Select Benchmark depending on scheme and compare

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 Portfolio Management Process

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 Risk Management

Risk Management Function

Risk category   Risk factors
  Volatility in performance, portfolio concentration,
Fund management Interest rate movement, liquidity risk & credit
 
risk.
Deal error, settlement problem, NAV & fund pricing
Operations  
error, inaccurate financial reporting, fraud.
Customer   Error in deal processing, fraud .
Marketing & distribution  
New product development, selling & distribution
Other business risk   Critical knowledge loss, skills shortage, third party
•Disaster recovery & business contingency plans. risk
•Insurance against third party loss (R&TA), arising from error & omission.

Indian Institute of Capital Markets

 Risk Management

Flow Cycle of a Diff. b/w MF Balance sheet Effect on

Mutual Fund and Direct of a Bank and Indian
Investment Mutual Fund Economy

Regulatory History of Risk-return Steps to Invest

Aspects Mutual Funds structure of in Mutual Fund
in India schemes

Risk What Mutual

Management Funds are not?

Indian Institute of Capital Markets

 What Mutual Funds are not?

• MFs are not ‘get rich quick investments’

• MFs are not ‘risk free investment’
• MFs are not ‘assured return investment’
• MFs are not ‘a universal solution to all investment needs’

• Bibliography-
http://www.sbimf.com/portal/static/applyonline.html
http://www.fundsavvy.com/mutual_funds_articles/buy-mutual-funds.htm
http://www.mutualfundsindia.com/
www.rediff.com / MONEY
www.amfiindia.com/
http://www.sharemarketbasics.com/Mutual-Funds

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Thank
You

Indian Institute of Capital Markets