NISM_VA_Ch_02_Concept and Role of A Mutual Fund

NISM VA Concept and Role of A Mutual Funds July 13, 2022

Objectives By the end of the session you will be able to: • Understand the concept of a Mutual Funds • Know the classification of Mutual Funds • Get clear idea on growth of the Mutual Funds industry in India

Concept of A Mutual Funds 3

Role of Mutual Funds 01 02 03 04 Assist Investors Raise Money Corporate Governance Nation Building 05 Livelihood TaxFor Market 06 Government 07 Stabiliser 4

Investment Objectives of Mutual Funds 04 01 0 0 01 02 3 4 Overnight Equity fund Long Duration Hybrid fund fund fund 5

Investment Policy of Mutual Funds 01 Once the investment objective is finalised, the The investment policy mutual funds scheme’s includes the scheme asset allocation and investment policy is arrived it. investment style. 02 6

Important Concepts of Mutual Funds Units Mark to Face Value Market Unit Asset Under Capital Management Recurring Net Asset Expenses Value 7

Advantages of Mutual Funds for Investors Tax Deferral Liquidity Transparency 05 06 Economies 04 Tax of Scale 07 Benefits Affordable Portfolio Diversification Professional 03 08 Convenient Management 11 Options 02 09 01 Investment Comfort 10 Regulatory Comfort Systematic 8 Approach

Limitations of Mutual Fund Lack of Portfolio Customization Personal choice not available, PMS No Guaranteed Returns MF is a pass through vehicle may be an alternative and passes on returns as Choice Overload they are generated Multiple schemes * Multiple AMCs No Control Over Costs SEBI has put a limit to control the costs 9

Classification of Mutual Funds Organisational Management Investment Investment Other Fund Structure of Portfolio Objectives Portfolio Types Open Ended Active Growth Equity ETF Funds Funds Funds Funds Gold ETF Close Ended Passive Income Debt Funds Funds Funds Funds ELSS Interval Funds Hybrid Hybrid Retirement Funds Funds / Pension Scheme Liquid Funds Overseas Funds Fund of Funds 10

Equity Schemes Flexi – cap Fund Multi Cap Funds 01 02 Large Cap Funds Large & Mid Cap 03 04 Mid Cap Funds Funds Small Cap Funds 05 06 Dividend Yield Funds Value / Contra Funds 07 08 Focused Funds Sectoral / Thematic Funds 09 10 ELSS Funds 11

Debt Schemes 01 Overnight Money Market 05 Fund Fund 02 Liquid Short Duration 06 Fund Fund DEBT 03 Ultra Short Medium Duration 07 Duration Fund Fund 04 Low Duration Medium to Long 08 Fund Duration Fund 12

Debt Schemes…Cont’d 09 Long Duration Banking and PSU 13 Fund Fund 10 Dynamic Fund Gilt Fund 14 DEBT Gilt Fund with 10- year constant 11 Corporate Bond duration 15 Fund 12 Credit Risk Fund Floater Fund 16 13

Hybrid Schemes Aggressive Hybrid Dynamic Asset Multi Asset Fund Allocation or Allocation Balanced Advantage 03 04 Balanced Hybrid Fund 05 02 Arbitrage Fund 06 Conservative Hybrid Hybrid Equity Savings Fund Schemes 07 01 14

Solution Oriented Schemes Children’s Fund Retirement Fund 15

Other Schemes Index Funds/Exchange Traded Fund There can be only one scheme per category, Fund of Funds except in the following cases: (Overseas/Domestic) 1. Index funds and ETFs replicating or tracking 16 different indices, 2. Fund of Funds having different underlying schemes, and 3. Sector funds or thematic funds investing in different sectors or themes

Other Categories of Funds Infrastructure 01 Fixed Maturity Plans Investment Trusts 06 Capital Protection Real Estate 05 02 Funds Investment Trusts 04 03 (REIT) Infrastructure Debt Funds Real Estate Mutual Funds 17

New Types of Funds 01 02 03 Smart Beta Quant Funds International Fund REITs 18

Growth of Mutual Industry in India Growth of the Indian mutual Mutual funds assets under funds industry has been AUM has risen from 22.26 lac crores in 2020 to 31.4 stupendous in comparison to the world. lac crore in 2021. Number of folios has seen a big rise from 4.80 crore folios in March 2010 to 8.97 crore in March 2020. Indian mutual funds industry share has gone up from 0.33 percent in 2008 to 0.60 percent in 2018. 19

Summary: • Mutual funds is a vehicle to mobilize money from investors, to invest in different markets and securities, in line with stated investment objectives. • Its primary role is to help investors in earning an income or building their wealth, by investing in the opportunities available in securities markets. • Mutual funds have started acquiring their fair share in the portfolios of the investors, as well as in the minds of the people.

Thank you