7528352 mutual fund presentation

8/8/2019 7528352 Mutual Fund Presentation

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An old Axiom :

It is not wise to put all eggsinto one basket

was probably in the minds of those who formed the first mutual fund.


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Presented by: Richi Shrivastava Amit Mukherjee

Keshri N.Tripathi

Kanhaiya Gupta

MUTUAL FUND


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Expenses of MF What MFs are not?

MF Comparison with U.S.Portfolio Management

Risk ManagementInvestment strategy

Organization of Mutual FundTypes of Schemes

Concept

Content

Regulations

Reference Websites


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A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.

The money thus collected is then invested in capital marketinstruments such as shares, debentures and other securities.

The income earned through these investments and the capitalappreciation realized are shared by its unit holders inproportion to the number of units owned by them.

Thus a Mutual Fund is the most suitable investment for thecommon man as it offers an opportunity to invest in adiversified, professionally managed basket of securities at arelatively low cost.

Concept


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SEBI (mutual fund) Regulation,1996S tructure of MF in India

SPONSER

TRUS TEE

AMCs

Distribution/Agents Banker R& T Agents

Custodian

Orga niz a tion al St ru ct ur e of MF


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S ponsor

Akin to theP

romoter of the company,Contribute min 40% of net worth of AMC,P osses sound financial record over five years period,Establishes the Fund,Gets it registered with the SE BI,Forms a trust, & appoints Board of trustee.

TrusteesH olds assets on behalf of unit holders in trust.Trustees are caretaker of unit holders money.


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Two third of the trustees shall be independentpersons (not associated with the sponsor).

Trustees ensure that the system, processes & personnel are in place.

Resolves unit holders G R IEV AN CES .

Appoint AMC & Custodian, & ensure that all activitiesare accordance with the SE BI regulation.


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CustodianH

olds the fund s securities in safekeeping,Settles securities transaction for the fund,Collects interest & dividends paid on securities,Records information on corporate actions.

Ex amples of custodian

H DFC CITY BANK

ABN AMRO IIT CORPOR ATE SERV ICES

SBI IN DIA STAN DARD CH ARTRE D

S H CIL DEU TSCH E BANK


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A sset Management CompanyFloats schemes & manages according to SE BI.Can not undertake any other business activity, otherthan portfolio mgmt services.75% of unit holders can jointly terminate

appointment of AMC.At least 50% of independent directors.Chairman of AMC can not be a trustee of any MF.

Ex amples of A MC

U TI ICICIP rudential Reliance

SBI Canbank I N G Vysya

S tanchart Taurus H SBC


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D istributor / A gentsSell units on the behalf of the fund.

It can be bank, N BFCs, individuals.

B ankerFacilitates financial transactions,P rovides remittance facilities.

Registrar & Transfer A gentMaintains records of unit holders accounts & transactionsDisburses & receives funds from unit holdertransactions,


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P repares & distributes a/c settlements,Tax information, handles unit holder communication,P rovides unit holder transaction services.

Ex amples of R & T A gents

CAMS KARV Y

MCS Ltd Datamatics

MN Dastoor & Co IIT Corporate Services

Computeronics TC S

ICICI Infotec U TI ISL


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SEBI (MF), 1996 as regulator of MF.Provisions of SEBI IMPACT

Legal character of MF MF can be set up only as T RUS T.MF can t invest in Gold, silver & real asset.U

nit holder can t challenge trustees.S tructure of MF Arms-length relationship b/w various constituents.

Independent custodian.

Registration of MF Must fulfill eligibility criteria u/s 7.

AMC have min net worth of 10 cr.

O peration of MFs Disclosure of information.Advertisements.Daily pricing.R isk management system.

R e gula to ry Aspect


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Incorporated on 22 August, 1995.Apex body of all the registered AMCs.

All AMCs are its member.O bjective to maintain high ethical & professionalstandard.P rovide certificate to Agents to sell MFBest practice guidelines.Code of ethics.

R o le of AMFI


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Each category is classified into more sub-categories.

Fund schemes Portfolio objectives

Growth & Income H igh R isk & H igh Return

Balanced Moderate R isk & Return

Liquid & Money Market Fixed Return

Gilt Zero R isk

ELSS Tax Saving

Fund of funds Additional diversification

AMFI C la ssific a tion of MF schemes


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B y S tructure O pen- Ended anytime enter/exit Close- Ended Schemes listed on exchange, redemption after period of

scheme is over.

B y Investment O bjective Equity (Growth) only in S tocks Long Term (3 years or more) Debt (Income) only in Fixed Income Securities (3-10 months) Liquid/Money Market (including gilt) Short-term Money Market

(Govt.) Balanced/ H ybrid Stocks + Fixed Income Securities (1-3 years)

O ther S chemes Tax Saving Schemes Special Schemes ( ETFs, foreign funds)

O the r c la ssific a tion of MF schemes


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Ex change traded funds are Mix of stocks & MFs.Like MF, they comprise a set of specific stocks- e.g.an index like N ifty/ Sensex or commodity like gold, orReal estate .Like equity they are traded on stock exchange on realtime basis.There have been a couple of ETFs from P rudentialICICI AMC and U TI AMC.

W h a t ar e ETFs


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R isk R et ur n of diffe r ent schemes


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Systematic Investment Plan ( SI P) Invest a fixed sum every month. (6 months to 10 years) Fewer units when the share prices are high, and more units

when the share prices are low. Average cost price tends to fallbelow the average N AV.

N owadays ,Insurance is free with SIP.Systematic Transfer Plan ( S TP)

Invest in debt oriented fund and give instructions to transfer afixed sum, at a fixed interval, to an equity scheme of the samemutual fund.

Systematic Withdrawal Plan ( SWP)Flex i Withdrawal Plan (FWP)

Investment St ra te gy


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P o r tfo lio M a n ag ement P r ocess


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Investor objective

O ptimalP ortfolio

P ortfolioO ptimization

Expected Return

Volatility &Correlation Estimates

Constraints onP ortfolio choice

Fu nd M a n ag ement P r ocess


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Return Risk

market

Group / IndustryGrowth C yclical stable

Individual S tock

A ctiveS trategy

B eta or Market Risk

Ex tra market co-varianceO r

Group / Industry Risk

Specific Risk

PassiveS trategy

Fu nd m a n ag e rs Investment J u d g ments


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R isk management is defined as the:

Overall process of identifying & understanding the full spectrum of an organizations risk &taking informed action to help it achieve its

strategic objectives, reduce the likelihood of failure & decrease the uncertainty of overall business performance

R isk M a n ag ement


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Risk Management function.

D isaster recovery & business contingency plans.Insurance against third party loss (R& TA ), arisingfrom error & omission.

Risk category Risk factors

Fund management Volatility in performance, portfolio concentration,Interest rate movement, liquidity risk & credit risk.

O perations Deal error, settlement problem, N AV & fund pricingerror, inaccurate financial reporting, fraud.

Customer Error in deal processing, fraud .

Marketing & distribution N ew product development, selling & distribution

O ther business risk Critical knowledge loss, skills shortage, third party risk


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A n O verviewDeveloped market

Low cost countries (LCC) having total expense (.3%), (.59%),

even less than one.O rganizational structure is different from India.Vast product variety e.g. diamond, currency, metal ETFs, smallcap MF, macro cap MF, bear market MF, kids MF, commodity

MF, donor advised MF(tax exemption)etc.Vast variety of different countries equity & debt fund

Comp ar ison with US m ar ket


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(An asterisk indicates fee is included in a fund s expense ratio)As per SE BIRule expense ratio should be 2.5% for equity & 2.25% for debt

fund of fund value.

A ccounted for in FUN D RE TURN Not included in FUN D RE TURN

Management fee* Front end sales load

Group fee* Back end sales load

P erformance fee* Transaction fee

Administrative fee* Redemption fee

12(b)-1 fee* Account maintenance fee

Brokerage costs Bid ask spreads

Interest costs

Expenses of MF


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MF s are not get rich quick investmentsMF s are not risk free investmentMF s are not assured return investmentMF s are not a universal solution to allinvestment needs

What MFs are not..


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WEBsiteshttp://news.moneycontrol.com/mf/glossary.php

http://www.investopedia.com/university/mutualfunds/default.asp

http://www.valueresearchonline.com

http://www.amfiindia.com/

http://www.mutualfundsindia.com/resourcecentre.asp

books

Mutual fund industry in India- ICFAI university press.Mutual fund product & services- Taxman (IIFB).Security analysis-Taxman (IIFB).

R efe r ences


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THANK YOU

7528352 mutual fund presentation

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