1. Mutual Funds - Operations in India Presented by Ramya H V Roll no 79 Batch 15

3. Structure in India Mutual Funds in India follow a 3-tier structure Sponsor – starts an MF ; creates a public trust. Trust is then registered with SEBI after which is known as an MF Sponsor is not the MF but the trust is. AMCs (appointed by the trustees) manage the money Sponsor (first tier) Trustee/Public Trust (second tier) AMC (third tier)

4. Who manages investor’s money? Asset Management Companies – appointed by the trustees AMCs charge a fee to the investors AMCs BOD – to have atleast 50% as independent directors Functions under the supervision of BoD, SEBI and trustees. AMCs in name of the Trust, floats new schemes and manage these schemes by buying and selling securities Manages investors funds on a day-to-day basis.

5. Mutual Fund Marketing Marketing strategy specific to each type of fund needs to be devised. (Eg: income funds for risk averse investors and growth funds for risk-takers) Marketing plan needs to stress the firm-product- customer relationship Product Planning BrandingPricingDistributionPromotionServicing

6. Distribution MF industry in India continues to be metro and urban centric, only now it is beginning to tap Tier 2 and Tier 3 towns as a vital component of their growth strategy.

7. Operations Indian MF industry while on a high growth path needs to address efficiency and customer centricity Focus on core aspects of the business such as product development and distribution and outsource other services Managing costs and ensuring customer satisfaction need to be the key goals

8. What is an NFO? Once the 3 – tier structure is in place, the AMC launches new schemes, under the name of the Trust, after getting approval from the Trustees and SEBI. The launch of a new scheme is known as a New Fund Offer (NFO). Before investing, it is expected that the investor reads the Offer Document (OD) carefully to understand the risks associated with the scheme.

10. Procedure for investing in an NFO Ex: Gold ETF Reading KIM (Key Information Memorandum) a must if you miss reading the OD G-ETFs during an NFO 1. AMC decides on launching of G-ETF 2. Investors give money to AMC and AMC gives units to investors in return 3. AMC buys Gold of specified quality at the prevailing rates from investors’ money

11. Investor’s rights and obligations Right to receive the dividend within 30 days of declaration On redemption request by investors, the AMC must dispatch the redemption proceeds within 10 working days of the request. In case the AMC fails to do so, it has to pay an interest @ 15% Investors can obtain relevant information from the trustees and inspect documents like trust deed, investment management agreement, annual reports, offer documents, etc Right to be informed about changes in the fundamental attributes of a scheme.

12. AMFI and its objectives AMFI (Association of Mutual Funds in India) is the industry association for the mutual fund industry in India which was incorporated in the year 1995. Promote the interests of the mutual funds and unit holders and interact with regulators – SEBI/ RBI/ Govt. /Regulators Set and maintain ethical, commercial and professional standards in the industry Increase public awareness and understanding of the concept and working of MFs in the country To develop a cadre of well-trained distributors and to implement a programme of training & certification.

13. MF terms you need to know.. NAV Entry load, Expense Ratio, Exit Load Portfolio Turnover SIP, STP and SWP

14. Choosing between Dividend Payout, dividend Reinvestment and Growth Options – Which one is better for the investor? Growth option Capital appreciation No requirement of regular income from his investment Remain invested for a long period of time Dividend Payout option Annual Cash outflow No benefit of compounding as the cash is taken out of the scheme and will not continue to grow Dividend Reinvest ment option Reinvest the dividend in the scheme

15. Challenges & Issues Low levels of customer awareness Limited focus on increasing retail penetration Limited focus beyond the top 20 cities Limited innovation in product offerings Multiple Regulatory Frameworks Governing Financial Services Sector verticals Limited Customer Engagement “Mutual funds are still sold, not bought.”

16. THANK YOU!