Mutual Fund India

The income earned through these investments and the capital appreciations 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. The flow chart below describes the broadly the working of a Mutual Fund. INVESTORS ____ Pool their money with -___THE FUND MANAGER ______ Invest in ____SECURITES _______ Generates – returns – passed back to the INVESTORS.What is the history of Mutual Funds in India and role of SEBI in mutual funds industry?Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds. In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are – to protect the interest of investors in securities and to promote the development of and to regulate the securities market. SEBI amends MF Regulations to permit launch of capital protection oriented schemes vide notification dated 25 August, 2006. Securities and Exchange Board of India, vide its circular dated 14th August 2006 has amended the SEBI (Mutual Funds) Regulations to provide for the launch of capital protection oriented schemes. The term ‘capital protection oriented scheme’ means a mutual fund scheme which is designated as such and which endeavors to protect the capital invested therein through suitable orientation of its portfolio structure;” As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. SEBI approved Asset Management Company (AMC) which manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. The general power of superintendence and direction over AMC is vested with the trustees.According to SEBI Regulations, two thirds of the directors of trustee company or board of trustees must be independent. They should not associate with the sponsors. 50 of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme.Increase of load more than the level mentioned in the offer document is applicable only to prospective investments by MFs. FOR original investments , the offer documents has to be amended to make investors aware of loads at the time of investment.Types of Mutual Funds Schemes in IndiaWide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry. TYPES OF MUTUAL FUND SCHEMES •By Structure oOpen - Ended Schemes oClose - Ended Schemes oInterval Schemes•By Investment Objective ooGrowth Schemes oIncome Schemes oBalanced Schemes oMoney Market Schemes•Other Schemes oTax Saving Schemes oSpecial Schemes.oIndex Schemes.oSector Specific SchemesFUTURE OF MUTUAL FUNDS IN INDIA:By December 2004, Indian mutual fund industry reached Rs 1, 50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40, 90,000 crore.The annual composite rate of growth is expected 13.4 during the rest of the decade. In the last 5 years we have seen annual growth rate of 9. According to the current growth rate, by year 2010, mutual fund assets will be double.Some facts for the growth of mutual funds in India •100 growth in the last 6 years.•Number of foreign AMC’s are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.•Our saving rate is over 23, highest in the world. Only channelizing these savings in mutual funds sector is required.•We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion.•'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities.•Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products.•SEBI allowing the MF's to launch commodity mutual funds.•Emphasis on better corporate governance.•Trying to curb the late trading practices.•Introduction of Financial Planners who can provide need based advice. FAQs: Mutual FundsDoes SEBI tag make your money safe? What is the procedure for registering a Mutual Fund with SEBI? Whom to approach for Grievance Redressal? Any many more things you always wanted to know about Mutual Funds? We have tried to segregate all your queries topic wise for easy and quick search in this field. •What is the procedure for registering a mutual fund with SEBI?An applicant proposing to sponsor a mutual fund in India must apply in Form A in a prescribed fee. The applicant is examined and once the sponsor satisfies certain conditions such as being in the financial services, business and possessing positive net worth for the last five years, having net profit in three out of the last fine years and possessing the general reputation of fairness and integrity in all business transactions, it is required to complete the remaining formalities for setting up a mutual fund. These include inter alia , executing the trust deed and investment, management, agreement, setting up a trustee company / board of trustees comprising two- thirds independent trustees, incorporating the asset management company (AMC), contributing to at least 40 of the net worth of the AMC and appointing a custodian. Upon satisfying these conditions, the registration certificate is issued subject to the payment of registration fees of Rs. 25.00 lacs.•Can a mutual fund change the nature of the scheme from the one specified in the offer document?Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e. g. structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit holder and an advertisement is given in one English daily newspaper having circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit holders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close ended to open ended scheme and in case of change in sponsor.•Can a mutual fund change the asset allocation while deploying funds of investors?Considering the market trends, any prudent fund manager can change the asset allocation i. e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interests of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and giving them option to exit the scheme at prevailing NAV without any load.•How long will it take for transfer of units after purchase from stock markets in case of close ended schemes?According to SEBI regulations, transfer of units is required to be done within thirty days from the date of lodgment of certificates with the mutual fund.•If mutual fund scheme is wound up, what happens to the money invested?In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the mutual funds which gives all necessary details. •How can the investors redress their complaints?Investors would find the name of the contact person in the offer document of the mutual fund whom they may approach in case on any queries, complaints or grievances. The names of the directors of asset management and trustees are also given in the offer documents. Investors can also approach SEBI for their complaints. On receipt of complaints, SEBI takes up matters with the concerned and follows up with them till the matter is solved.•What is the procedure for redressal of investor grievances? Investors would find the name of contact person in the offer document of the mutual fund scheme whom they may approach in case of any query, complaints or grievances. Trustees of a mutual fund monitor the activities of the mutual fund. The names of the directors of asset management company and trustees are also given in the offer documents. Investors should approach the concerned Mutual Fund / Investor Service Centre of the Mutual Fund with their complaints,If the complaints remain unresolved, the investors may approach SEBI for facilitating redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned mutual fund and follows up with it regularly.

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