69f1dMFS Module III

Amity Business School
MARKETING OF
FINANCIAL SERVICES
Module III
Mutual Funds
Ramesh Bagla
Meaning
• 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
market instruments such as shares, debentures and
other securities.
• The income earned through these investments and the
capital appreciation realised 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.
Mutual Fund Operation – Flow Chart

Advantages of Mutual Funds

• Professional Management
• Diversification
• Convenient Administration
• Return Potential
• Low Costs
• Liquidity
• Transparency
• Flexibility
• Choice of schemes
• Tax benefits
• Well regulated
FREQUENTLY USED TERMS

• Net Asset Value (NAV) is the market value of the assets of the scheme minus its liabilities.
The per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.
• Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a
sales load.
• Repurchase Price
Is the price at which units under open-ended schemes are repurchased by the Mutual Fund.
Such prices are NAV related.
• Redemption Price
Is the price at which close-ended schemes redeem their units on maturity. Such prices are
NAV related.
• Sales Load
Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load.
Schemes that do not charge a load are called ‘No Load’ schemes. \
• Repurchase or ‘Back-end’Load
Is a charge collected by a scheme when it buys back the units from the unitholders. .
History of MFs in India

• Phase I. Establishment and Growth of Unit Trust of
India(UTI) - 1964-87
Ø UTI enjoyed complete monopoly when it was

established in 1963 by an act of Parliament.
Ø UTI was set up by RBI and it continued to operate
under the regulatory control of the RBI until the two
were de-linked in 1978 and its control was given to
IDBI
Ø UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the
largest number of investors in any single investment
scheme over the years

• Phase I. Establishment and Growth of Unit Trust of
India(UTI) - 1964-87
Ø UTI launched more innovative schemes in 1970s and

80s to suit the needs of different investors.
Ø It launched ULIP in 1971, six more schemes between
1981-84, Children's Gift Growth Fund and India Fund
(India's first offshore fund) in 1986, Mastershare (India's
first equity diversified scheme) in 1987 and Monthly
Income Schemes (offering assured returns) during
1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs 6700 crore..

• Phase II. Entry of Public Sector Funds - 1987-1993
Ø The Indian mutual fund industry witnessed a number of public

sector players entering the market in the year 1987.
Ø In November 1987, SBI Mutual Fund from the State Bank of
India became the first non-UTI mutual fund in India.
Ø It was followed by Canbank Mutual Fund, LIC Mutual Fund,
Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC
Mutual Fund and PNB Mutual Fund.
Ø By 1993, the assets under management of the industry
increased seven times to Rs. 47,004 crore. However, UTI
remained to be the leader with about 80% market share.
.
Assets Under Mobilisation as % of gross Domestic

1992-93 Amount Mobilised
Management Savings
UTI 11,057 38,247 5.2%
Public Sector 1,964 8,757 0.9%
Total 13,021 47,004 6.1%


• Phase III. Emergence of Private Sector Funds - 1993-96
Ø The permission given to private sector funds including foreign

fund management companies (most of them entering through
joint ventures with Indian promoters) to enter the mutual fund
industry in 1993, provided a wide range of choice to investors
and more competition in the industry
Ø Private funds introduced innovative products, investment
techniques and investor-servicing technology. By 1994-95,
about 11 private sector funds had launched their schemes.

• Phase IV. Growth and SEBI Regulation - 1996-2004
Ø The mutual fund industry witnessed robust growth and stricter regulation
from the SEBI after 1996. The mobilisation of funds and the number of
players operating in the industry reached new heights as investors started
showing more interest in mutual funds
Ø Investors' interests were safeguarded by SEBI and the Government offered
tax benefits to the investors in order to encourage them
Ø SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set
uniform standards for all mutual funds in India
Ø The Union Budget in 1999 exempted all dividend incomes in the hands of
investors from income tax
Ø Various Investor Awareness Programmes were launched during this phase,
both by SEBI and AMFI, with an objective to educate investors and make
them informed about the mutual fund industry

• Phase IV. Growth and SEBI Regulation - 1996-2004
Ø In February 2003, the UTI Act was repealed and UTI was stripped of
its special legal status as a trust formed by an Act of Parliament.
The primary objective behind this was to bring all mutual fund
players on the same level. UTI was re-organised into two parts:
1. The Specified Undertaking, 2. The UTI Mutual Fund
Ø Presently Unit Trust of India operates under the name of UTI Mutual
Fund and its past schemes (like US-64, Assured Return Schemes)
are being gradually wound up. However, UTI Mutual Fund is still the
largest player in the industry.

• Phase V. Growth and Consolidation - 2004 Onwards
• The industry has witnessed several mergers and acquisitions

recently, examples of which are acquisition of schemes of Alliance
Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB
Mutual Fund by Principal Mutual Fund
• Simultaneously, more international mutal fund players have entered
India like Fidelity, Franklin Templeton Mutual Fund etc. There were
29 funds as at the end of March 2006. This is a continuing phase of
growth of the industry through consolidation and entry of new
international and private sector players.

Current Market Scenario-India

• The Indian Mutual fund industry has
witnessed considerable growth since its
inception in 1963.
• The assets under management (AUM) have
surged to Rs 4,173 bn in Mar-09 from just Rs
250 mn in Mar-65.
• In a span of 10 years (from 1999 to 2009),
the industry has registered a CAGR of
22.3%, albeit encompassing some shortfalls
in AUM due to business cycles.

• India has been amongst the fastest growing markets for
mutual funds since 2004,witnessing a CAGR of 29
percent in the five year period from 2004 to 2008 as
against the global average of 4 percent
• The increase in revenue and profitability, however, has
not been commensurate with the AUM growth in the last
five years.
• Low share of global AUM, low penetration levels, limited
share of mutual funds in the household financial savings,
and the climbing growth rates in the last few years that
are amongst the highest in the world, all point to the
future potential of the Indian mutual fund industry

• The Indian Mutual fund industry that started with traditional
products like equity fund, debt fund and balanced fund has
significantly expanded its product portfolio.
• Today, the industry has introduced an array of products
such as liquid/money market funds, sector-specific funds,
index funds, gilt funds, capital protection oriented schemes,
special category funds, insurance linked funds, exchange
traded funds, etc.
• It has introduced Gold ETF fund in 2007 with an aim to allow
mutual funds to invest in gold or gold related instruments.
Further, the industry has launched special schemes to invest
in foreign securities.
• The wide variety of schemes offered by the Indian Mutual
fund industry provides multiple options of investment to
common man.
The Association of Mutual Funds in India

(AMFI) is dedicated to developing the
IndianMutual Fund Industry on profession
al, healthy and ethical lines and to enh
ance and maintain standards in all are
as with a view to protecting and prom
oting the interests of mutual funds and
their unit holders.

.





• With a strong growth in the AUM of
domestic Mutual fund industry, the ratio of
AUM to GDP increased gradually from
4.7% in 2001 to 8.5% in 2009.
• The share of mutual funds in households’
financial savings also witnessed a
substantial increase to 7.7% in 2008 as
against 1.3% in 2001.
Challenges & Issues

• Low customer awareness levels and financial
literacy pose the biggest challenge to
channelising household savings into mutual funds
• Fund houses have shown limited focus on
increasing retail penetration. Most AMCs and
distributors have a limited focus beyond the top 20
cities
• The Indian mutual fund industry is largely
product-led and not sufficiently customer
focused
• There is limited flexibility in fees and pricing
structures currently
Challenges & Issues

• Distributors and the mutual fund houses have
exhibited limited interest in continuously engaging
with customers post closure of sale as the
commissions and incentives have been largely in the
form of upfront fees from product sales.
• Limited focus of the public sector network
including public sector banks, India Post etc on
distribution of mutual funds has also impeded the
growth of the industry
• Multiple regulatory frameworks govern different
verticals within the financial services sector, such as
PAN card & KYC requirements, mode of payment
(cash vs cheque), funds management by insurance
companies and commission structures, among others.
Future Outlook
• As per a KPMG study ,AUM is likely to continue to
grow in the range of 15 to 25 % from the period 2010
to 2015 based on the pace of economic growth
• In the event of positive reinforcement of growth
drivers, it may grow at the rate of 22 to 25 percent in
the period from 2010 to 2015, resulting in AUM of
INR 16,000 to 18,000 billion in 2015
• In the event of a relatively slower economic growth
resulting in the growth drivers not reaching their full
potential, the Indian mutual fund industry may grow in
the range of 15 to 18 percent in the period from
2010 to 2015, resulting in AUM of INR 15,000 to
17,000 billion in 2015
Action Plan for Growth

• There is a need for a collaborative effort across all key
stakeholders to harness the future growth potential and reach out to
the customer.
• Given that customer awareness is the pre-requisite for the
achievement of the industry growth potential, there is a need for
planning, financing and executing initiatives aimed at increasing
financial literacy and enhancing investor education across the
country through a sustained collaborative effort across all
stakeholders, that is expected to result in a massive increase in
mutual fund penetration.
• AMCs should focus on product innovation and introduction of
flexibility in pricing.
• Public sector thrust into mutual funds distribution and focus on
strengthening presence beyond Tier 2 cities will entail training of
the public sector employee base through the "Train the Trainer"
approach, so that they may be inducted as trainers to support
customer awareness campaigns.

• Opening up of the public sector branch network
in Tier 3 and Tier 4 towns will include India
Post, Nationalised Banks, Regional Rural Banks
and Cooperative Banks. This will also require a
boost to be provided to Investor Service Centres
(ISCs)
• Focus on increasing customer engagement pre
and post completion of the investment will be
beneficial. CII and AMFI should help to steer the
industry vision. The recognition of the Association
of Distributors by SEBI would also be beneficial for
the long term wellbeing of the industry.

• Harmonisation of policies across multiple
regulatory frameworks in the financial services
sector must be taken up on high priority through
constitution of a Steering Committee under the aegis
of the Ministry of Finance, comprising the Financial
Services Regulators for mutual funds and capital
markets, pension, insurance, banking and other
verticals along with representation from the CBDT.
• Stronger focus on customer centricity, cost
management and robust governance and
regulatory framework - all aimed at enabling the
industry to achieve sustained, profitable growth, going
forward
Current Market Scenario - Global

Mutual Funds in India

A. Bank Sponsored
1. Joint Ventures - Predominantly Indian
- Canara Robeco Asset Management Company Limited
- SBI Funds Management Private Limited
2. Joint Ventures - Predominantly Foreign
- Baroda Pioneer Asset Management Company Limited
3. Others
- IDBI Asset Management Ltd.
- UTI Asset Management Company Ltd
B. Institutions
- LIC Mutual Fund Asset Management Company Limited

C. Private Sector
1. Indian
- Axis Asset Management Company Ltd.
- Benchmark Asset Management Company Pvt. Ltd.
- Deutsche Asset Management (India) Pvt. Ltd.
- Edelweiss Asset Management Limited
- Escorts Asset Management Limited
- IDFC Asset Management Company Limited
- JM Financial Asset Management Private Limited
- Kotak Mahindra Asset Management Company
Limited(KMAMCL)

C. Private Sector
1. Indian (cond.)
- L&T Investment Management Limited
- Motilal Oswal Asset Management Company Limited
- Peerless Funds Management Co. Ltd.
- Quantum Asset Management Company Private Limited
- Reliance Capital Asset Management Ltd.
- Religare Asset Management Company Limited
- Sahara Asset Management Company Private Ltd.
- Sundaram Asset Management Company Limited
- Tata Asset Management Limited
- Taurus Asset Management Company Limited

• C. Private Sector
2. Foreign
- AIG Global Asset Management Company (India) Pvt.
Ltd.
- BNP Paribas Asset Management India Private
Limited
- FIL Fund Management Private Limited
- Franklin Templeton Asset Management (India)
Private Limited
- Goldman Sachs Asset Management (India) Private
Limited
- Mirae Asset Global Investments (India) Pvt. Limited
- Pramerica Asset Managers Private Limited

3. Joint Ventures - Predominantly Indian
- Birla Sun Life Asset Management Company
Limited
- DSP BlackRock Investment Managers
Private Limited
- HDFC Asset Management Company
Limited
- ICICI Prudential Asset Mgmt.Company
Limited

4. Joint Ventures - Predominantly Foreign
- AEGON Asset Management Company Pvt. Ltd.
- Bharti AXA Investment Managers Pvt. Ltd.
- HSBC Asset Management (India) Private Ltd.
- ING Investment Management (India) Pvt. Ltd.
- JPMorgan Asset Management India Pvt. Ltd.
- Morgan Stanley Investment Management Pvt. Ltd.
- Principal Pnb Asset Management Co. Pvt. Ltd.
- Shinsei Asset Management (India) Pvt. Ltd.
Market Share of Prominent Players

Terminology
• Asset Allocation
– Diversifying investments in different assets such as stocks, bonds, real
estate, cash in order to optimize risk.
• Fund Manager
– The individual responsible for making portfolio decision for
a mutual fund, in line with fund’s objective.
• Fund Offer Document
– Document with investment objectives, risk factors, expenses summary,
how to invest etc
• Dividend
– Profits given to the investor from time to time.
• Growth
– Profits ploughed back into scheme. This causes the NAV to rise.
• NAV
– Market value of assets of scheme minus its liabilities.
Terminology
• Entry Load/Front-End Load
– The commission charged at the time of buying the fund.
– To cover costs for selling, processing
• Exit Load/Back- End Load

– The commission or charge paid when an investor exits from
a mutual fund. Imposed to discourage withdrawals
– May reduce to zero as holding period increases.
• Sale Price/ Offer Price

– Price you pay to invest in a scheme. May include a sales load. (In this
case, sale price is higher than NAV)
• Re-Purchase Price/ Bid Price

– Price at which close-ended scheme repurchases its units
• Redemption Price
– Price at which open-ended scheme repurchases its units
Types of Mutual Fund Schemes

• By Structure
– Open-Ended – anytime enter/exit
– Close-Ended Schemes – listed on exchange, redemption after period
of scheme is over.
• By Investment Objective
– Equity (Growth) – only in Stocks – 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/Hybrid – Stocks + Fixed Income Securities (1-3 years)
• Other Schemes
– Tax Saving Schemes
– Special Schemes like ULIP
Types of Funds - By Structure

OPEN ENDED FUNDS CLOSE ENDED FUNDS
Investors can buy and sell units of the It is open for sale only for a specified
fund, at any time, directly from the period, after which further sales are
fund. closed.
They are traded at NAV related prices. They are traded at a discount to NAV.
The corpus keeps on changing. The corpus of closed ended funds
remains unchanged.
The unit capital is not fixed but The unit capital is fixed, one time
variable. sale.
Any time redemptions always allowed, Redemption of Units on expiry date

except when there is lock in period.
Equity Debt Money

Market
Equity Funds Fixed Income
Index Funds Funds Money Market
Sector Funds GILT Funds Mutual Funds
Balanced Funds Liquid Funds

Mutual Fund Products

GROWTH INCOME BALANCED LIQUID/
SCHEMES SCHEMES SCHEMES MM
SCHEMES
Objective To provide To provide To provide both To provide
capital regular and growth and easy liquidity,
appreciation steady income income preservation of
over the medium to investors capital and
to long term moderate
income.
Ideal For Investors in their Retired people & Investors looking Corporates
prime earning others in need of for a &individuals as
years. regular secured combination of a means to
Investors income income and park their
seeking growth moderate growth surplus funds
over long term. for short
periods.
Mutual Fund Products

Risk Return Hierarchy of Different Funds

Risk High
Sector Funds
Diversified Equity Funds
Index Funds
Balanced Funds
Debt Funds
Gilt Funds
Risk Low MMMF
Low return High return

Equity Funds
• Diversified equity funds
• Index funds
• Value funds
• Mid-cap funds
• Equity-linked savings schemes(ELSS)
• Sector funds like Auto, Health Care, FMCG etc
• Dividend Yield Funds
• Others (Exchange traded funds etc)
Equity Linked Savings Scheme

(ELSS)
• 3 year lock in period
• Minimum investment of 90% in equity
markets at all times
• Eligible u/s 80 C upto Rs.1 lakh
• Dividends are tax free
• Benefit of Long term Capital gain taxation
• Ideal for Investors seeking tax incentives
Index Fund & Exchange Traded Fund(ETF)

• Simplest and least risky of all equity funds.
• Investment in all the scrips and in exactly the same proportion as the
scrips lie in their underlying benchmark index
• While an index fund buys and sells scrips on the stock exchanges,
an ETF (Exchange Traded Fund) appoints market participants
• They exchange a basket of securities (whose composition exactly
matches that of the benchmark index) against the ETF unit. These
ETF units are then traded on stock exchanges like stocks
• While index funds can be bought or sold from the MF or through an
agent like any other ordinary scheme, ETFs can only be bought and
sold on exchanges, therefore you need a DEMAT account to
buy/sell them.
Debt Funds
• Corporate Bond funds

• Gilt funds
• Floating rate funds
• Bond index funds
Mutual Funds vs Other Investments

What does one look for while investing
• Safety
• Regulatory Framework
• Return – Absolute/Inflation adjusted
• Liquidity
• Tax Savings
• Future Financial Planning
• Ease of Management
Mutual Funds vs Other Investments

Other Investment Options
• Bank Deposits
• Post Office Deposit Schemes
• Public Provident Fund(PPF)
• Govt/Infrastructure Bonds
• Direct Equity
• Insurance/ULIPs
• Real Estate
• Gold & Precious Stones
Composition of Households’ Gross Financial Savings

Fund Structure
Fund Structure
• A mutual is set up in the form of a trust which has
(i) Sponsor
(ii) Trustees
(iii) Asset Management Company (AMC)
(iv) Custodian
• The sponsors set up the trust as promoters
• The trustees hold the property in trust for the benefit of the
unitholders.. They are vested with general powers of
unitholders
superintendence and direction over the AMC and they
monitor their performance and compliance with the SEBI
regulations.
• The AMC manages the funds.
• The custodian holds the securities of the fund in its custody.
Fund Structure
• The Mutual Fund is constituted as a trust in
accordance with the provisions of the Indian
Trusts Act, 1882 by the Sponsor.
• The instrument of trust should be in the form
of a deed duly registered and executed by
the sponsor in favour of the trustees under
the Indian Registration Act, 1908.
• The contents of the trust deed have been
prescribed by the SEBI.
Registration of Mutual Funds

• To carry on their business, mutual funds
must be registered with the SEBI.
• The registration is granted on the
fulfillment of the prescribed eligibility
criteria for the sponsors in terms of track
record, contribution to the net worth of the
AMC, appointment of trustees, AMC and
custodian.
Sponsor
• Sponsor is the person who acting alone or in
combination with another body corporate
establishes a mutual fund.
• Sponsor must contribute at least 40% of the net
worth of the Investment Managed and meet the
eligibility criteria prescribed under the Securities
and Exchange Board of India (Mutual Funds)
Regulations, 1996.
• The Sponsor is not responsible or liable for any
loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it
towards setting up of the Mutual Fund.
Trustees
• The trustees are vested with the general power of
superintendence and direction over AMC. They
monitor the performance and compliance of SEBI
Regulations by the mutual fund.
• The main responsibility of the trustees is to
safeguard the interest of the unit holders and inter
alia ensure that the AMC functions in the interest
of investors and in accordance with the Securities
and Exchange Board of India (Mutual Funds)
Regulations, 1996, the provisions of the Trust
Deed and the Offer Documents of the respective
Schemes.
Appointment of Trustees
• A person can be appointed as a trustee on the fulfilment
of the prescribed conditions, such as that he should be
a person of ability, integrity and standing, who has not
been guilty of moral turpitude/ convicted of any economic
offence/violation of any securities laws
• Two-
Two-thirds of the trustees of a mutual fund must be
independent persons and not associated with the
sponsors in any manner
manner.. The trustees should enter
into an investment management agreement with the
AMC for the purpose of making investments
investments..
• The trustees would have the right to obtain from the
AMC, all information concerning the operations of the
various schemes of the mutual fund managed by it.
it.
Role & Responsibility of Asset Management Company

• The sponsor of the mutual fund/trustees would
appoint the AMC, with the prior approval of the
SEBI.
• Its appointment can be terminated by a majority of
trustees or 75 per cent of the unitholders of the
scheme.
• The eligibility criteria for the appointment of an AMC
include sound track record, adequate professional
experience, not guilty of moral turpitude, non-
non-
conviction for any economic offence/violation of any
securities laws, inclusion of 50 per cent independent
directors and net worth of at least Rs. 10 crore
crore..

• An AMC cannot act as a trustee of a mutual
fund
• It can undertake other business activities in the
nature of portfolio management services,
management and advisory services to offshore
funds/ pension funds/provident funds/ venture
capital funds, management of insurance funds,
financial consultancy and exchange of
research on a commercial basis, if any of these
activities do not conflict with the activities of the
mutual fund
fund..

• It is obligatory for an AMC to take all reasonable
steps and exercise due diligence to ensure that the
investment of funds conforms to the provisions of
the SEBI regulations and the trust deed.
deed.
• It can purchase/sell securities upto a maximum of 5
per cent of the total, through a broker associated
with the promoter
promoter..
• It is required to disclose details of all transactions
with/through the sponsor/associate companies
companies..
• The AMC has to file details of securities transactions
by its key personnel in their own name or on behalf
of the AMC, to the trustees/SEBI
trustees/SEBI..

• The AMC has to file details of its directors
and transactions with sponsor/associate
companies, with the trustees/SEBI
trustees/SEBI..
• The AMCs are prohibited from appointing as
a key personnel, any person found guilty of
any economic offence or involved in a
violation of securities laws
laws..

• Every AMC is required to keep, maintain and
preserve proper books of accounts/records/
documents for 8 years, for each scheme
scheme..
• It should follow the specified accounting policies
and standards so as to provide the appropriate
details of the schemewise disposition of the assets
at the relevant accounting date and the
performance during the period, together with
information regarding the distribution and
accumulation of the income accruing to the
unitholders,, in a fair and true manner
unitholders manner..

• All expenses should be clearly identified and
appropriated in the individual schemes
schemes..
• The AMC may charge the mutual fund with investment
and advisory fees, which should be fully disclosed in
the offer document
document..
• All other expenses would be borne by the
AMC/trustees/sponsor..
AMC/trustees/sponsor
• Initial issue expenses of floating a scheme cannot
exceed 6 per cent of the initial resources raised and
must be accounted in the books of account of the
scheme..
scheme

• An AMC can launch a mutual fund scheme after its
approval by the trustees and filing of the offer document
with the SEBI
SEBI..
• The offer document should contain adequate disclosures
to enable the investors to make an informed investment
decision..
decision
• All advertisements pertaining to mutual fund schemes
should conform to the advertisement code specified by
SEBI.. The advertisement should also disclose the
SEBI
investment objective of the scheme
scheme.. The offer document
and advertisement materials should not be misleading or
contain incorrect/false information
information..

• An AMC may launch schemes on a 'load' or
'partial load' basis
basis..
• In case of a no load scheme, the initial issue
expenses should be borne by the AMC
AMC..
• In a partial load scheme a part of the load
would be borne by the AMC and the balance
by the scheme
scheme..
• In a load scheme, the entire expense would be
borne by the scheme
scheme..
Role & Responsibility of Registrars

• The AMC if so authorized by the Trust
Deed, appoints the Registrar and Transfer
Agent to the Mutual Fund.
• The Registrar processes the application
forms, redemption requests and dispatches
account statements to the unit holders.
• The Registrar and Transfer agent also
handles communications with investors and
updates investor records.
Role & Responsibility of Custodian

• The mutual fund should appoint a custodian to carry
out the custodial services for the scheme
scheme..
• Custodian, who is registered with SEBI, holds the
securities of various schemes of the fund in its
custody..
• A mutual fund cannot appoint a custodian in which
50 per cent or more of the voting rights/directorships
is held by the sponsor/associate companies
companies..
• The custodian agreement, the service contract and
terms of appointment require prior approval of the
trustees..
trustees
Fund Structure of Birla Sun Life

Name of the Mutual Fund :Birla Sun Life
Mutual Fund
Name(s) of Sponsor :Aditya Birla Nuvo Ltd.

& Sun Life (India) AMC Investments Inc.
Name of Trustee Company :Birla Sun Life
Trustee Company Private Limited
Fund Structure of Birla Sun Life

Name of the Custodian : J.P. Morgan
Chase Bank, Mumbai, registered with
SEBI under registration number
IN/CUS/014
Name of the Registrar : Computer Age
Management Services Pvt. Ltd. (CAMS),
Chennai
Sales Distribution Channels

Essentials of a Good Distribution System
• Careful product selection
• Careful selection of internal sales staff
• Right targeting of customers - a properly graded
Geographical strategy based on a demographic
study
• Proper training of sales staff
• Educating / counseling the customer about products,
• After sales servicing

Direct Selling
• Direct selling is the least significant element
today. Normally, only very big ticket items are
done through this channel
• Alternatively, it derives its inflows mainly from
online sales.
• However, recently this channel is getting a
fillip.
• MFs are gearing up by opening their own
offices in more places.

Organised Distributors
• Organised distributors are the backbone of MF
distribution.
• They have infrastructure and flexibility to adapt to
the need of the hour.
• They too have realized the importance of going to
smaller centers and are establishing offices in
urban and semi-urban locations.
• This is the channel which needs to be nurtured to
expand

Banks as Distributors
• Banks are emerging as a key distribution channel as they
have huge potential to build and improve the retail segment
• There are two major types of bank distributors :
Ø Banks which handle wealth management of their clients
and, on their behalf, manage portfolios wherein investment
in mutual funds is one asset class.
Ø Such banks have sophisticated wealth management
practices with qualified staff and well-heeled clients.
Ø MNC banks & private banks like HSBC, Citi, ICICI, HDFC,
Kotak are examples.

Ø Banks that use their networks to sell MFs as just another
financial service.
Ø Most of the PSBs and other commercial banks including large
cooperative banks fall under this category.
Ø For these banks the existing customer base serves as a captive
prospective investor base for marketing mutual funds.
Ø They have the advantage of having already won the trust of the
customer.
Ø There is no other distribution channel that can have a more
effective retail penetration across Tier-II and Tier-III cities as well
as across rural India.
Ø This channel has slowly realized its own potential and is now
emerging as a big player.

• Abroad banks are among the leading fund
supermarkets.
• The Post Office too has been emerging as an
effective channel.
• PSBs & post offices are likely to emerge as a very
crucial channel for “financial inclusion” in the MF
arena.
• This combination along with the online variants in
the near future will dominate the distribution of
mutual funds.

Independent Financial Advisors (IFAs)
• Presently the IFA is the friendly neighborhood guy – one
who is very effective in selling the product.
• However, he has to manage his costs from the commission
he gets
• Advisory services are today given gratis.
• The scenario is changing and the space in advisory
services will undergo a rapid change in the next few years.
• Financial Planning services will be much sought after

The Future
• The potential for growth of MF distribution channels is huge.
• Currently 77% of the investments in mutual funds come from
metros and Tier I towns.
• The scenario is likely to change with everyone expanding.
• SBI MF alone has more than 100 points of acceptance across
India, 28 investor service centers, 45 investor service desks and
52 district organizers, a base of over 20,000 agents.
• SBI’s branch network, which is one of the widest networks in the
country, as well as India Post and offices of CAMS, are parts of
this distribution network.
• Reliance and HDFC are believed to have plans to have their
presence in 400 places.

• UTI already has probably the largest network.
• Its strategy, firstly, is to increase the penetration to cover
Tier II-Tier III cities and rural areas.
• Secondly, complementary to the first idea, enhancing
investor education and awareness initiatives by the
industry is getting high priority.
• Progressive fund houses are increasing appropriate
technological infrastructure in rural areas and
strengthening alternative distribution networks.

• Investment is an area where consultation is very
important
• The direct route will be used by very few investors.
• What is needed is standardization of operational
areas and services like inner fund house swaps,
common portals providing single view of
investments with the entire industry, uniform and
pooled customer education including investor
communication.

• Success in the Indian Mutual Fund
Industry, in the midst of all the growth
that is evident, will depend upon strong
distribution network and transparent
approach towards trust building
• Client servicing at retail level has to
assume greater importance

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Amity Business School

Mutual Fund Operation – Flow Chart

Advantages of Mutual Funds

FREQUENTLY USED TERMS

History of MFs in India

Ø UTI enjoyed complete monopoly when it was

History of MFs in India

Ø UTI launched more innovative schemes in 1970s and

History of MFs in India

Ø The Indian mutual fund industry witnessed a number of public

Amity Business School

History of MFs in India

Assets Under Mobilisation as % of gross Domestic

UTI 11,057 38,247 5.2%

Public Sector 1,964 8,757 0.9%

Total 13,021 47,004 6.1%

History of MFs in India

Ø The permission given to private sector funds including foreign

History of MFs in India

History of MFs in India

History of MFs in India

• The industry has witnessed several mergers and acquisitions

History of MFs in India

Current Market Scenario-India

Current Market Scenario-India

Current Market Scenario-India

The Association of Mutual Funds in India

Current Market Scenario-India

Amity Business School

Current Market Scenario-India

Current Market Scenario-India

Current Market Scenario-India

Current Market Scenario-India

Current Market Scenario-India

Challenges & Issues

Challenges & Issues

Action Plan for Growth

Action Plan for Growth

Action Plan for Growth

Current Market Scenario - Global

Mutual Funds in India

Mutual Funds in India

Mutual Funds in India

Mutual Funds in India

Mutual Funds in India

Mutual Funds in India

Market Share of Prominent Players

• Exit Load/Back- End Load

• Sale Price/ Offer Price

• Re-Purchase Price/ Bid Price

Types of Mutual Fund Schemes

Types of Funds - By Structure

Any time redemptions always allowed, Redemption of Units on expiry date

Equity Debt Money

Balanced Funds Liquid Funds

Mutual Fund Products

Mutual Fund Products

Risk Return Hierarchy of Different Funds