Transcript MUTUAL FUNDS

MUTUAL FUNDS
HISTORY
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UTI WAS THE ONLY MUTUAL FUND OPERATING SINCE 1964. IT IS AN
OPEN ENDED FUND- UNITS CAN BE PURCHASED AND SOLD BACK
TO UTI ANY TIME. IT WAS A PUBLIC SECTOR MONOPOLY POSITION
FUND. MANY TAX BENEFITS WERE OFFERED FOR BUYING UNITS
SINCE 1987 MANY PUBLIC SECTOR BANKS SET UP THEIR MUTUAL
FUNDS- FOLLOWING AN AMENDMENT IN THE BANKING
REGULATION ACT-THAT COMMERCIAL BANKS CAN CARRY ON NONBANKING BUSINESS.
MUTUAL FUNDS BUSINESS WAS THROWN OPEN TO PRIVATE AS
WELL AS FOREIGN INSTITUTIIONS AFTER 1992—LIBERALISATION.
MUTUAL FUNDS CATER TO THE NEEDS OF SMALL SAVERS AND
INDIVIDUAL INVESTORS.
DEFINITION
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IT IS AN ASSOCIATION OR TRUST OF MEMBERS WHO WISH TO
INVEST IN FINANCIAL INSTRUMENTS FOR MUTUAL BENEFITS.
FUNDS COLLECTS MONEY FROM MEMBERS AND INVESTS SUCH
MONEYS IN DIVERSIFIED PORTFOLIO OF FINANCIAL ASSETS WITH A
VIEW TO REDUCE RISKS AND MAXIMISE INCOME. INVESTORS ARE
BENEFITTED BY THE EXPERTISE AVAILABLE WITH THE MUTUAL
FUND.
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MUTUAL FUNDS ARE OF VARIOUS TYPES
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OPEN ENDED
CLOSE ENDED WITH SPECIFIC TIME FRAME WHERE THE MATURITY
MAY ALSO BE FIXED.
TYPES OF MF..CONTD..
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ON THE BASIS OF OBJECTIVES—
INCOME FUND
GROWTH FUND (CAPITAL APPRECIATION)
BALANCED FUNDS (INCOME AND GROWTH)
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ON THE BASIS OF INVESTMENT PATTERNS—
INVESTMENT IN GOVT.SECURITIES
INVESTMENT IN DEBENTURES
INVESTMENT IN EQUITIES
SECTORWISE INVESTMENT
MONEYMARKET MUTUAL FUNDS
TAXATION FUNDS
TYPES OF FUNDS..CONTD..
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LEVERAGE FUNDS—THEY ARE USED TOINCREASE THE SIZE OF
THE VALUE OF PORTFOLIO(BORROWED FUNDS)
DUAL FUNDS- SINGLE INVESTMENT OPPORTUNITY FOR TWO
DIFFERENT TYPES OF INVESTORS –INCOME UNIT AND CAPITAL
UNITS.
INDEX FUNDS- THE PORTFOLIO IS DESIGNED IN SUCH A MANNER
THAT THEY REFLECT THE COMPOSITION OF SOME BROAD BASED
INDEX –SECURITIES IN THE SAME PROPORTION AS INDEX. IT
INVOLVES LESS ADMINISTRATIVE EXPENSES AND LOWER
TRANSACTION COST.
BOND FUNDS– PORTFOLIO CONSISTS OF FIXED INCOME
SECURITIES –BONDS.
OFF-SHORE FUNDS– MEANT FOR NON-RESIDENT
INVESTORS.REGULATED BY THE PROVISIONS OF THE FOREIGN
COUNTRY WHERE IT IS REGISTERED.
IMPORTANCE OF MUTUL FUNDS
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CHANNELISING SAVINGS
OFFERING WIDE PORTFOLIO INVESTMENT
PROVIDING BETTER YIELDS
EXPERT INVESTMENT ADVICE AT LOW COST
TAX BENEFITS
PROVIDING RESEARCH SERVICE
INTRODUCING FLEXIBLE INVESTMENT SCHEDULE.
SIMPLIFIED RECORD KEEPING
SUPPORTING CAPITAL MARKET
PROMOTING INDUSTRIAL DEVELOPMENT
KEEPING MONEY MARKET ACTIVE.
RISKS OF MUTUAL FUNDS
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MARKET RISKS
SCHEME RISKS
INVESTMENT RISKS (EXPERTISE)
EXTERNAL RISKS
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ORGANISATION OF FUND
SPONSORING INSTITUTION PROMOTING FUND
TEAM OF TRUSTEES.
ASSET MANAGEMENT COMPANY TO DEAL WITH FUNDS ASSETS
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EXPENSES MAXIMUM 1.25 % IF THE FUND IS LESS THAN 100
CR.AND 1 % IF IT EXCEEDS 100 CRORES.
FACILITIES AVAILABLE TO THE INVESTORS
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REPURCHASE FACILITY
REISSUE FACILITY
ROLL OVER FACILITY (REINVESTING FOR ANOTHER TERM)
LATERAL SHIFTING FACILITIES
SIP
• NET ASSET VALUE– TRHE REPURCHASE PRICE IS LINKED TO
NAV. IT IS MARKET VALUE OF THE SECURITIES HELD
DIVIDED BY THE NUMBER OF UNITS.. IT IS THE INTRINSIC
VALUE OF THE UNIT.
INVESTORS’ RIGHTS
• UNIT CERTIFICATE WITHIN 10 WEEKS FROM DATE
OF CLOSURE FOR CLOSE ENDED AND 6 WEEKS
FOR INITIAL OFFER.
• TRANSFER WITHIN A PERIOD OF 30 DAYS.
• REFUND OF APPLICATION MONEY(STATUTORY
MINIMUM AMOUNT 20 CRORES FOR CLOSE E NDED
,50 CRORES FOR OPEN ENDED OR 60 % OF
TARGETED AMOUNT WHICHEVER IS
HIGHER.APPLICATIOPN MONEY HAS TO BE
RETURNED WITHIN 6 WEEKS
SOME SHORTCOMINGS OF MFS
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DISPARITY BETWEEN NAV AND LISTED PRICE
NO UNIFORMITY IN CALCULATION OF NAV
LACK OF TRANSPERANCY
POOR INVESTOR SERVICING
EXCESSIVE DEPENDENCE ON OUTSIDE AGENCIES
ABSENCE OF QUALIFIED SALES FORCE
INVESTORS EXPECTATIONS ALWAYS RISING -=-HENCE BIG
PROMISES.