SEBI has recently allowed allowed registered stockbrokers to transact mutual fund units on behalf of their clients through the stock exchange mechanism. When the systems are in place there are a few points the investor has to consider while investing in mutual funds through Stock Exchanges (NSE and BSE)

- Existing mutual fund investors who intend to buy more units will also benefit as this system will allow them to keep track of all investments under a single statement.

- The SEBI circular on Friday also said that investors can hold units of mutual fund schemes in dematerialised form, and that the demat statement given by the depository participants would be deemed adequate compliance with SEBI norms. Buying and selling will become more efficient and transparent , particularly if investors choose to transact through a demat account.

- Though cost seems to be a factor for those who do not have a demat account, the impact will be minimal for those who already are demat account holders.

- End-users can use the convenience of their neighbouring broker’s office for their mutual fund transactions. However, once the broker starts acting as a distributor, there is an issue about what commission he might ask for and whether the client would be ready to pay that or not.

- In terms of convenience, the advantages are similar to investing online through the AMC’s website — reducing the clutter of paperwork and speedy execution.

- Investing in SIPs (systematic investment plans) – A reading of the SEBI circular on entry loads suggests that the entry load will continue to apply on instalments of SIPs registered before August 2009. As long as this loophole remains unplugged, existing SIPs will be at a disadvantage to the ones registered after August 1. The only way out is to stop the existing SIPs and start afresh in the same scheme.For those with SIPs, the only way to benefit from the entry load waiver is to stop them and start new ones in the same scheme.

- Switching from one scheme to another within the same fund house – As per the new guidelines, no entry load will be charged for purchases, additional purchases and switch-in accepted by any fund house with effect from August 1, 2009.Similarly, no entry load will be charged with respect to applications for registration under systematic transfer plans.

Source : ET and Hindu Businessline

Consider yourself a mutual fund company in which millions of investors have invested their trust, not just money with a hope of getting good returns on their investment. The criticality lies in the soundness of fund’s management responsible for meeting the expectations of the investors as well as fund’s financial goal. There are multiple key players at the background working together to achieve this common goal. These players and their role is what we will be scanning through here.

Sponsor:

A sponsor is an entity responsible for laying the foundation stone of a fund. In real sense, it puts in the seed money in fund’s set up. Any registered company, a scheduled bank or financial institution can act as sponsor. As per SEBI norms it must possess a prerequisite and good financial record in past. AMC and custodian are appointed by sponsor but once AMC is constituted, sponsor is just the stakeholder of fund and is not liable for making up any operational losses of the fund.

Board of trustees:

Mutual funds in India are constituted as trusts and have a board of trustees to run the fund. AMC is a third party appointed by trustees for managing the money but the real power lies with the trust that is accountable for investor’s money held in the fund. They can even sack the AMC if it is found doing unethical practices or underperforming.

Custodian:

It is an independent entity appointed for holding and safekeeping of the fund’s assets. Bigger fish, bigger will be the pond. As the portfolio of securities for a mutual fund is so big it need a third party for receipt, delivery of securities and keeping an account of the same. Most of the funds use banks as their custodians but one bank can act as custodian of multiple funds. On a broader side when instead of common public, bigger players like FIIs are the investors; the concept of domestic and global custodian comes into picture.

AMC:
Asset Management Company can be considered as the heart of any fund. It manages the investments you have made. At the core are fund managers or portfolio managers taking investment decisions on your behalf. They have access to critical market data that helps them analyse the market conditions and explore investing opportunity to meet their financial objectives. In addition, it is responsible for maintaining a record of pricing and accounting data. It also calculates NAV of the fund that is mandated by SEBI to be disclosed publicly on daily basis. The fund charges investors a fee called management fees for the services offered by AMC.

The ultimate aim any fund is benefit of investors and SEBI is keeping an eye on above entities to ensure compliance of rules and regulations set for the investor’s benefit. The fund regulations in India are considered the best in the world and one major strength lies in well coordinated structure with defined roles of sponsor, trustee, AMC that tend to protect investor’s from risk of default.

Renuka Kinger

Money is merely a piece of paper until you realise the importance of saving and making it grow spirally. There is plethora of investment avenues available at present, but what suits your objective is the one you should opt for. On a broader picture, a common man can think of two options, either invest in shares offering glamorous returns with an associated unknown risk or invest in the regular income debt options offering lesser but safer returns.

Now the question arises: Is there a way in middle so that you get good returns like equity and safety of investment like fixed income options. Yes, a Mutual fund is what you should look for.

Why Mutual funds?

What if you are a novice in the world of stock markets but still want to invest? What if you don’t have enough risk appetite for the investments you want to make? What if you don’t have time and skill to manage your portfolio and want some professionally qualified people to invest on your behalf? What if you are a novice in the world of stock markets but still want to invest?

What are Mutual funds?

As implicit by name, mutual fund is a fund mutually held by the investors who are the beneficiaries of the fund. It is a type of Investment Company which collects money from so many investors in common pool and then invests this capital raised in variety of options like bonds, equity, gold, real estate etc. At the core of it are professionally qualified people called fund managers analysing the markets conditions and making investment decisions with an objective of maximization of profit. Substantially all the earnings of a MF are passed on to the investors in proportion to their investments. In lieu of the services offered, the mutual fund also charges some fees from the investors. The diagram below clearly indicates that investors invest in mutual fund that further makes investment in various options.

Mutual Funds Basics

Having been through basics, one can infer that investing in mutual funds is an easy way of playing safe in equity especially you being unaware of tactics of stock markets because it provides professional expertise of fund managers who make investment decisions based on constant study and market research. Besides this, it offers benefits like diversification of portfolio. Since mutual fund is a collective investment vehicle, they have an option to invest in different sectors of market like retail, real estate in addition to options like debt and commodities market. This reduces the risks to which an individual investor would have been exposed if a particular sector is in period of downfall. The simplicity of investment and various benefits offered have made them so popular that can be seen from their growth in past. They came into picture in 1963 with 67bn assets under management (AUM) compared to current figures of 4609.49bn with total of 35 mutual funds available at present and still expected to grow in years to come.

Renuka Kinger

SBI transfers Unitech exposure from debt funds to equity funds – In a bid to cushion a blow to its debt schemes, SBI Funds Management Pvt. Ltd has moved debt papers it holds of embattled Delhi-based realtor Unitech Ltd into its equity schemes.
This means investors in its equity schemes will have to bear any risk that the Unitech debt paper brings with it.

The move means investors in its equity schemes will have to bear any risk that the debt paper brings

SBI Mutual Funds’ moving Unitech paper from debt to equity schemes comes in the wake of other AMCs also resorting to transferring some real estate debt papers they hold to their parent organisations. Mint had reported on 15 December, 2008, that state-owned Life Insurance Corp. of India Ltd had in October bought at least Rs1,755 crore worth of illiquid debt paper, largely of real estate firms, from its mutual fund subsidiary, LIC Asset Management Company Ltd (LIC MF).

Source : Livemint.com