“A study on Contribution of Asset Management Companies

(AMCs) in Indian Financial Markets”

A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor of Commerce (Accounting and Finance)

Under the Faculty of Commerce

By

Jeet Pravin Arya

Under the Guidance of

Prof. Yogita Mahimkar

RSET’s

Ghanshyamdas Saraf College of

Arts and Commerce

Affiliated to University of Mumbai

Reaccredited by NAAC with ‘A’ Grade

S.V. Road, Malad (W)

Mumbai – 400064

MARCH 2022
 RSET’s

Ghanshyamdas Saraf College

of Arts and Commerce

Affiliated to University of Mumbai

Reaccredited by NAAC with ‘A’ Grade

S.V. Road, Malad (W)

Mumbai – 400064

CERTIFICATE

This is to certify that Ms./Mr. Jeet Pravin Arya has worked and duly completed her/his
Project Work for the degree of Bachelor of Commerce (Accounting & Finance) under
the Faculty of Commerce in the subject of Accounting & Finance and her/his
project is entitled,
“A study on Contribution of Asset Management Companies (AMCs) in Indian
Financial Markets” under my supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of any
University.

It is her/ his own work and facts reported by her/his personal findings and
investigations.

___________________________ _____________________
Project Guide Principal
Prof. Yogita Mahimkar

College
___________________________ Seal
External Examiner
Date:
 DECLARATION

I the undersigned Ms./Mr. Jeet Pravin Arya hereby, declare that the work embodied
in this project work titled
“A study on Contribution of Asset Management Companies (AMCs) in Indian
Financial Markets”,
forms my own contribution to the research work carried out under the guidance of Prof.
Yogita Mahimkar is a result of my own research work and has not been previously
submitted to any other University for any other Degree/ Diploma to this or any other
University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

_________________________
Student: Ms./Mr.
Jeet Pravin Arya

Certified by

_____________________
Project Guide Prof.
Yogita Mahimkar
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous, and the depth
is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr. Jayant Apte for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Course Co-ordinator, Prof. Mamta Chhajer for
her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Prof. Yogita
Mahimkar whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me
throughout my project.
 Executive Summary
India Asset Management Market is estimated to grow at a CAGR of approximately 14 %
during the forecast period. India’s asset management companies (AMCs) own (AUM) worth
INR24.46 trillion, out of the total industry assets, around 80% is owned by the top 10 AMCs
in the market. Assets managed by the Indian mutual fund industry have grown from
INR23.59 trillion in November 2018 to INR26.94 trillion in November 2019 (based upon the
average assets per month). That represents a 14.21% growth in assets over November 2018.
Rising AUM and regulatory effort to lower cost for customers is seen bringing down yield
(Total Expense Ratio) on AUM for the industry in the long run. However, growth in AUM
with a favourable mix and continued focus on improving operational efficiency makes a case
in favour of sustainable growth in earnings. The past few years have witnessed a significant
evolution in the asset management industry in India, Individual investors have grown at a
significant pace and now command nearly 58% of the AUM. Equity as an asset class has
grown in prominence, now accounting for nearly 45% of the AUM as against 23% five years
ago. A large share of this shift has been driven by increasing penetration across B15 cities
that now account for nearly a quarter of the AUM.

Systematic investment plans (SIPs) have made retail investing more sustainable, shielding
investors from market volatility. On an average, 9.55 lacs SIP accounts each month during
the FY 2019-20, with an average SIP size of about INR 2,800 per SIP account. Mutual Fund
SIPs accounts stood at 2.94 crores and the total amount collected through SIP in November
2019 was INR 8,273 crore. SIP continued to be the preferred route for retail investors to
invest in a mutual funds as it helps them reduce market timing risk, The SIP installment
amount could be as small as INR 500 per month. SIP is like a recurring deposit where you
deposit a fixed amount every month. SIP is a very convenient method of investing in mutual
funds through standing instructions to debit your bank account every month, without the
hassle of having to write out a cheque each time. SIP has been gaining popularity among
Indian MF investors, as it helps in Rupee Cost Averaging and in investing in a disciplined
manner without worrying about market volatility and timing the market.

India lags most major nations of the world in terms of AUM of mutual funds as a percentage
of gross domestic product (GDP) at just 11% versus the world average of about 62%.
Relatively low penetration provides a large potential and opportunity for strong growth
ahead. India provides huge untapped potential and opportunity for Mutual Funds to be a great
vehicle to funnel household savings into productive investments. Industry saw exponential
growth in the retail base with industry adding over 4 crore new accounts and assets under
management more than doubling from around INR11 trillion to over INR25 trillion. Another
notable trend has been the growing investor participation from tier II and tier III towns which
now contributes about 23% of industry’s individual investor assets.

The report covers the major players operating in the India Asset management Market. The
market studied presents opportunities for growth during the forecast period, which is
expected to further drive the market competition. India Asset Management market is
consolidated as top players hold the major share in the market.
 Index
Chapter No. TOPIC Pages No.
CHAPTER 1 INTRODUCTION
1.1 Asset Management Company 2
1.2 Why Asset Management is important? 3
1.3 How Asset Management Companies Work? 4
1.4 How Does an Asset Management Company Differ From a 5
Brokerage?
1.5 How are funds managed by an AMC? 6
1.6 Bodies Governing AMC’s Operations 7
1.7 Where does the AMC stand in the overall mutual fund 10
structure?
1.8 Different Types of Asset Management Companies 10
1.9 Benefits to Asset Management Companies 45
1.10 Asset under Management 46
CHAPTER 2 RESEARCH METHODOLOGY
2.1 Objectives of the Study 48
2.2 Scope of study 48
2.3 Statement of problem 48
2.4 Nature of study/type of research 48
2.5 Time dimension 49
2.6 Data collection method 49
2.7 Limitations 49
CHAPTER 3 LITERATURE REVIEW 50
CHAPTER 4 DATA ANALYSIS, PRESENTATION AND 51
INTERPRETATION
CHAPTER 5 CONSLUSION AND SUGGESTION 94
BIBLIOGRAPHY AND ANNEXURE 97
 CHAPTER 1: INTRODUCTION

__________________________________________________________________

The management of physical assets is like any other evolving management discipline. It suffers
from terminology overload. The newcomer to the subject may struggle to understand the basics.
This is partly because of the unfamiliar context, but also because there are still relatively few
people around to ask! This book will give newcomers a starting point from which to develop
their knowledge. For those just past the starting point, it might give some structure to their
understanding. For the well-seasoned asset managers out there, I hope it provides either a feeling
of satisfaction, or better still, grounds for a good discussion! Managing assets effectively for
utilities is not optional these days. Across the globe, every society is faced with a significant
asset management challenge:
• Emerging economies are trying to identify the lowest cost / highest return investments to
achieve maximum immediate benefit.
• Rapidly developing countries are faced with understanding the life cycle costs of their
infrastructure.
• More mature economies are trying to find ways of extending the life of their infrastructure and
also meet major global challenges like climate change.

Asset management thinking can provide structure to assist in all of these scenarios. It can
improve the quality of life for millions of people. It is an important cog in the big machine of our
evolving civilization. Done well, it impacts positively on the well-being of the planet and
everything on it.

What do we mean by ’physical asset’?

1. Dictionary Definition of Asset “Any item of economic value owned by an individual or
corporation”

2. Why ‘physical’ asset?

We ARE referring to items such as buildings, utility infrastructure such as electrical cables,
water pipes, rail lines and metro tunnels, and industrial assets such as oil rigs, chemical plants
and process plant conveyors
We are NOT talking about financial assets, human assets or personal assets, as referred to in
their normal context but we may be talking about non-physical things that affect these physical
assets: skills, data, systems and software, for example

3. Other features of a ‘physical’ asset include:

• Its value may be represented on a corporation’s balance sheet
• It may be listed in a register (asset repository, see glossary).
• Its value normally depreciates over time
• Its condition normally deteriorates with time and / or use.
• It is likely to benefit from good stewardship
• It plays some role or has a function in the delivery of a process or service

Page | 1
1.1 Asset Management Company
______________________________________________________________________________

An Asset Management Company (AMC) is a firm that invests the funds pooled from individual
investors in securities with the object of optimal return for investors in exchange for a fee. AMC
maintains the diversity of portfolio by investing in both high-risk and low-risk securities such as
stock, debt, real-estate, shares, bonds, pension funds, etc.

Factors such as industry risk, return risk, market risk, and political risk are considered before
selecting any security to meet the return on investment targets. For example, a debt fund invests in
bonds and risk-free Government bonds to maintain a minimum risk. On the other side, an
equity oriented fund will invest in shares and stocks with high-risk and high return.

Asset management is the practice of increasing total wealth over time by acquiring,
maintaining, and trading investments that have the potential to grow in value.

Asset management professionals perform this service for others. They may also be called
portfolio managers or financial advisors. Many work independently while others work for
an investment bank or other financial institution.

KEY TAKEAWAYS

 The goal of asset management is to maximize the value of an investment portfolio over
time while maintaining an acceptable level of risk.
 Asset management as a service is offered by financial institutions catering to high net-
worth individuals, government entities, corporations, and institutional investors like
colleges and pension funds.
 Asset managers have fiduciary responsibilities. They make decisions on behalf of their
clients and are required to do so in good faith.

Asset management has a double-barreled goal: increasing value while mitigating risk. That is,
the client's tolerance for risk is the first question to be posed. A retiree living on the income
from a portfolio, or a pension fund administrator overseeing retirement funds, is (or should be)
risk-averse. A young person, or any adventurous person, might want to dabble in high-risk
investments.
Most of us are somewhere in the middle, and asset managers try to identify just where that is for a
client. The asset manager's role is to determine what investments to make, or avoid, to realize the
client's financial goals within the limits of the client's risk tolerance. The investments may
include stocks, bonds, real estate, commodities, alternative investments, and mutual funds,
among the better-known choices.

The asset manager is expected to conduct rigorous research using both macro and micro
analytical tools. This includes statistical analysis of prevailing market trends, reviews of
corporate financial documents, and anything else that would aid in achieving the stated goal of
client asset appreciation.

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 1.2 Why Asset Management is important?

______________________________________________________________________________

Keeping track of the assets of the company is an important task that can save companies money
and time. Asset management is the process of maximizing the assets of the company to provide
the best returns to stakeholders. More often than not, it involves asset recovery as well.
Businesses have a wide range of assets that include fixed and liquid assets. It is important for a
business to be able to manage its assets, and use them to get the maximum possible returns.
Below are the top ten reasons why asset management is important.

Asset Management is important because it can help organizations to:

1. Allows the organization to keep track of all their assets. It can tell where the assets are located,
how they are used, and when changes were made to them. The data from the asset management
solution can ensure that asset recovery will lead to better returns.
2. Manage assets from different locations in an accurate and effective manner. The company can
easily create an inventory report that might be required by some insurers or lease financiers.
3. Recovery is automatically reflected in an asset management system. Once assets are scrapped
or sold, the said assets will be removed from the records and books of the business. Related
assets, such as consumables and spare parts, are written off or sold to free storage space.
4. You can save money on maintenance. During the operational phase of the life cycle of the
asset, a company can face under maintenance or over maintenance problems. Maintenance is a
business expense that can cut into the profits of the company. Overdoing it can bring significant
costs. On the other hand, under-maintenance can lead to reduced productivity.
5. Asset management can also be used to make sure that the amortization rates are accurate.
Regular assessments of the assets will ensure that the financial statements of the business are
accurate.
6. It brings more efficient operation. Asset management allows an organization to understand the
capabilities of its assets, and how they can be operated in the most effective manner.
7. Allows the implementation of a risk management plan. Asset management also includes the
management of the risks connected with the use and ownership of the assets. Proper assessment of
the assets can help to identify the risks involved, and come up with a solution to avoid them.
8. Proper asset management can help optimize your operations that include the planning,
resources use, and in the implementation of the management program.
9. Removes ghost assets in your inventory. There are times when items that have been lost or
stolen are still in the inventory records. These are known as ghost assets. More often than not,
ghost assets were items that have been inaccurately recorded.
10. With the use of asset management system, incidents of thefts are lowered. Proper accounting
of the asset recovery process will ensure that the company maximizes the returns with no items
lost during the process.

Page | 3
 1.3 How Asset Management Companies Work?

______________________________________________________________________________

Asset management companies compete to serve the investment needs of high-net-worth

individuals and institutions.

Accounts held by financial institutions often include check-writing privileges, credit cards, debit
cards, margin loans, and brokerage services.

When individuals deposit money into their accounts, it is typically placed into a money market
fund that offers a greater return than a regular savings account. Account-holders can choose
between Federal Deposit Insurance Company-backed (FDIC) funds and non-FDIC funds.

The added benefit to account holders is all of their banking and investing needs can be met by the
same institution.

An AMC collects funds from different investors having different financial objectives. Now it
invests such a large pool of funds in a very diversified portfolio and enjoys economies of scale,
getting discounts on purchases. The return earned by the portfolio is then distributed among all
the small retail investors.
The services provided by an AMC is charged either on a fixed basis or commission-based. Fixed
Fee is nothing but a monthly or quarterly amount for maintaining the fund.

Points to consider before you choose an AMC:

Every AMC follows the investment objective of the schemes before investing and you must
check on the track record and performance history of the investment schemes in the past during
the ups and downs of the market. It is very important to know your AMC well before you invest
your hard-earned money.

While selecting a fund house ensure that the below parameters are met.

a. The reputation of an AMC- Reputation is built by consistency in performance over a few

years say 5 years or 10 years. The investor must go through the performance through annual
reports of schemes and AMC, reviews prevalent in the market and compliance report to SEBI,
AMFI, and RBI.

b. Fund Manager’s credibility- AMC work in parallel to its fund manager. The performance of
the fund manager is now the performance of AMC then. Hence, an investor must look for past
performance of the fund manager with regard to managing the assets and funds.
c. Price and Value- Before selecting any fund, an investor must consider looking at the price of
the fund and the value creation and return that the fund offer.

Page | 4
d. Fees and commission- Few AMCs charges a fixed fee for their services while others charge a
commission on the return earned on the fund. A fixed is considered over commission because an
investor will always know the outflow amount beforehand.

1.4 How Does an Asset Management Company Differ From a Brokerage?

_____________________________________________________________________________________

Asset management institutions are fiduciary firms. That is, their clients give them discretionary
trading authority over their accounts, and they are legally bound to act in good faith on the
client's behalf.
Brokers must get the client's permission before executing a trade. (Online brokers let their clients
make their own decisions and initiate their own trades.)
Asset management firms cater to the wealthy. They usually have higher minimum investment
thresholds than brokerages do, and they charge fees rather than commissions.
Brokerage houses are open to any investor. The companies have a legal standard to manage the
fund to the best of their ability and in line with their clients' stated goals.
Brokerage houses and AMCs overlap in many ways. Along with trading securities and doing
analysis, many brokers advise and manage client portfolios, often through a special "private
investment" or "wealth management" division or subsidiary. Many also offer proprietary mutual
funds. Their brokers may also act as advisors to clients, discussing financial goals,
recommending products, and assisting clients in other ways.

In general, though, brokerage houses accept nearly any client, regardless of the amount they
have to invest, and these companies have a legal standard to provide "suitable" services.
Suitable essentially means that as long as they make their best effort to manage the funds
wisely, and in line with their clients' stated goals, they are not responsible if their clients lose
money.

In contrast, most asset management firms are fiduciary firms, held to a higher legal standard.
Essentially, fiduciaries must act in the best interest of their clients, avoiding conflicts of interest at
all times. If they fail to do so, they face criminal liability. They're held to this higher standard in
large part because money managers usually have discretionary trading powers over accounts. That
is, they can buy, sell, and make investment decisions on their authority, without consulting the
client first. In contrast, brokers must ask permission before executing trades.

AMCs usually execute their trades through a designated broker. That brokerage also acts as the
designated custodian that holds or houses an investor's account. AMCs also tend to have higher
minimum investment thresholds than brokerages do, and they charge fees rather than
commissions.

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 1.5 How are funds managed by an AMC?

______________________________________________________________________________

An asset manager initially meets with a client to determine what the client's long-term financial
objectives are and how much risk the client is willing to accept to get there. From there, the
manager will propose a mix of investments that matches the objectives.

The manager is responsible for creating the client's portfolio, overseeing it from day to day,
making changes to it as needed, and communicating regularly to the client about those changes.

Basically, when you invest with an AMC, you invest in a portfolio that AMC maintains for you. It
is the responsibility of AMC to ensure an investor’s financial objective is met. AMC ensures this
by the following means:

1. Market Research and Analysis:

To build a portfolio for an investor the asset manager needs to do a lot of research on the market
trends, macro-economic and micro-economic factors, political aspects. On the basis of this
research, the appropriate securities are selected which will outperform the return expectations of
the investors.

2. Asset Allocation:
On the basis of market research and investor’s financial objective, the asset manager allocates
the funds to different assets. For example, a debt-oriented would invest just 20% in equity-
oriented funds to keep the risk levels low. However, an equity-oriented fund would invest more
than 70% in equity and rest in debt. A balanced fund would end up with just 60% in equity and
40% in debt to balance out return and risk.

3. Creating a Portfolio:
After research and analysis by analyst and decision of asset allocation are done, the asset
manager on the basis of market findings creates a portfolio. Here the asset manager will take
decisions like which security to sell, buy or hold for a period. The entire creation of portfolio is
solely based on the market expertise of professionals, research and study and investment goals of
the investor.

4. Review of Performance:
Since the fund of an investor is at stake, the performance measurement of the portfolio becomes
very important. At every point, the asset manager has to justify a buy, sell or hold securities to
investors and trustees. Every asset manager generally provide regular updates investor regarding
sales, repurchases, NAV, Return on risk, portfolio changes and factors which might affect their
portfolio.

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 1.6 Bodies Governing AMC’s Operations
______________________________________________________________________________

1. Securities and Exchange Board of India (SEBI):

SEBI is a statutory body and a market regulator, which controls the securities market in India.
The basic functions of Sebi are to protect the interests of investors in securities and to promote
and regulate the securities market. Sebi is run by its board of members. The board consists of a
Chairman and several other whole time and part time members. The chairman is nominated by
the union government. The others include two members from the finance ministry, one member
from Reserve Bank of India and five other members are also nominated by the Centre. The
headquarters of Sebi is situated in Mumbai and the regional offices are located in Ahmedabad,
Kolkata, Chennai and Delhi.

Before Sebi came into existence, Controller of Capital Issues was the regulatory authority; it
derived authority from the Capital Issues (Control) Act, 1947. In 1988, Sebi was constituted as
the regulator of capital markets in India. Initially, Sebi was a non-statutory body without any
statutory power. Following the passage of the Sebi Act by Parliament in 1992, it was given
autonomous and statutory powers.

Functions and powers of SEBI

Sebi controls activities of stock exchanges, safeguards the rights of shareholders and also
guarantees the security of their investment. It also aims to check fraudulence by harmonising its
statutory regulations and self-regulating business. The regulator also enables a competitive
professional market for intermediaries

Apart from the above functions, Sebi provides a marketplace in which the issuers can increase
finance properly. It also ensures safety and supply of precise and accurate information from the
investors. Sebi analyses the trading of stocks and safes the security market from the malpractices.
It controls the stockbrokers and sub- stockbrokers. It provides education regarding the market to
the investors to enhance their knowledge.

2. Association of Mutual Funds in India (AMFI):

The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian Mutual
Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in
all areas with a view to protecting and promoting the interests of mutual funds and their unit
holders.
AMFI, the association of SEBI registered mutual funds in India of all the registered Asset
Management Companies, was incorporated on August 22, 1995, as a non-profit organisation. As
of now, all the 42 Asset Management Companies that are registered with SEBI, are its members.

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Objectives of AMFI
1. To define and maintain high professional and ethical standards in all areas of operation of
mutual fund industry.
2. To recommend and promote best business practices and code of conduct to be followed by
members and others engaged in the activities of mutual fund and asset management including
agencies connected or involved in the field of capital markets and financial services.
3. To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on
all matters concerning the mutual fund industry.
4. To represent to the Government, Reserve Bank of India and other bodies on all matters
relating to the Mutual Fund Industry.
5. To undertake nationwide investor awareness programme so as to promote proper
understanding of the concept and working of mutual funds.
6. To disseminate information on Mutual Fund Industry and to undertake studies and research
directly and/or in association with other bodies.
7. To take regulate conduct of distributors including disciplinary actions (cancellation of ARN)
for violations of Code of Conduct.
8. To protect the interest of investors/unit holders.

AMC performs under the supervision of the board of trustees. All the Asset Management
Companies are governed by SEBI and AMFI.
Securities and Exchange Board of India (SEBI) is the Indian Capital Market Regulator which
governs and controls every AMC in India.

The Association of Mutual Funds in India (AMFI) is a statutory body formed by mutual fund
companies. AMFI was formed with the vision of a transparent and ethic driven financial
industry. Every AMC must comply with the regulations led by AMFI.

Banks being sponsors are governed by RBI as well along with SEBI and AMFI.
Lastly, all the regulatory bodies SEBI, AMFI, and RBI are governed by RBI.

Guidelines laid by SEBI, AMFI, and RBI for an AMC

Some of the mandatory practices and guidelines laid down by SEBI, AMFI, and RBI for a
mutual fund company to follow:
a. The Chairman of an AMC cannot hold the position of Trustee of any mutual fund.
b. Key personnel of every AMC should not have indulged or convicted for any fraudulent or
offensive acts.
c. AMC should not act as a Trustee of a mutual fund.
d. The net worth of an AMC must be not less than Rs. 10 crores.
e. Before making an investment in any of its schemes the company must disclose its intention to
invest in the offer documents.
f. A quarterly report on activities and compliance of regulations must be submitted to the
trustees.

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1.6.1 Reliability of AMC compared to Banks
We often have the notion that mutual fund companies are not as reliable as Banks and the
schemes offered by AMC are not as secure as a Fixed Deposit Interest. The fact is every mutual
fund company or AMC is governed by RBI and Ministry of Finance just like any Bank. Hence, it
is safe to invest with a mutual fund company or AMC .An AMC is appointed by the sponsor and
trustee to manage the pool of funds. AMC acts under the supervision of trustees who are
governed by SEBI and AMFI. This ensures transparency, accountability, and objectivity. Hence
one must go ahead and invest to optimize their wealth and save their taxes.
The sponsor creates or sets up an AMC under the Companies Act, 1956. The AMC charges a fee
and acts under the supervision of the trustees, who are, in turn, regulated by SEBI. The primary
reason for this is to ensure objectivity and transparency with the operations of the AMC.

1.6.2 Role of SEBI & AMFI in AMC Operations

An AMC works under the supervision of the board of trustees. But, they are answerable to
India’s capital market regulator, the Securities and Exchange Board of India (SEBI). The
Association of Mutual Funds in India (AMFI) is another statutory body that addresses investors’
grievances and looks after their interests. Every mutual fund house must comply with the set of
risk management guidelines by SEBI and AMFI.
While SEBI is a government body, mutual fund companies have formed the AMFI. Together,
they keep the functioning of the industry ethics-driven and transparent. RBI also plays an
essential role in regulating AMCs, and mutual funds need approval if they are launching
guaranteed schemes. Finally, the Ministry of Finance works as the authority for all these
regulators.

1.6.3 SEBI and AMFI guidelines investors should know

The following are some of the practices and guidelines for mutual fund companies that SEBI,
AMFI, and RBI mandate:

1. An AMC shall not serve as the trustee of any mutual fund.

2. The company shall not invest in any of its schemes unless full disclosure of its intention to
invest has been made in the offer documents.
3. They shall submit quarterly reports on its activities and the compliance with these regulations
to the trustees.
4. Key personnel of an AMC should have a clean record (not convicted of any economic offence
such as fraud or insider trading).
5. The Chairman of the AMC shall not be a trustee of any mutual fund.
6. The AMC should have a net worth of less than Rs 10 crores.
7. SEBI has guidelines for the reports that must be submitted by AMCs to the trustees. AMCs
must submit the compliance certificate to the trustees on a bi-monthly basis.

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 1.7 Where does the AMC stand in the overall mutual fund structure?
_____________________________________________________________________________________

The Government of India and RBI formed the Unit Trust of India (UTI) in 1963. Later, when the
government permitted public sector banks and institutions to set up mutual funds, the need for an
impartial regulator arose. As a result, they passed the SEBI Act (1992) and made AMCs integral
to the mutual fund structure in India.
To understand the functions of an AMC better, you must know where the AMC stands in the
mutual fund structure. All the entities mentioned in the box work in tandem to create different
mutual fund types catering to different sets of investors.

Sponsor Forms a trust and appoints the board of trustees

Trustees Regulates the mutual fund while adhering to SEBI and AMFI
norms

Asset Management Takes a call on which securities to sell/buy/hold and manages the
Company (AMC) investments of unit holders
Custodian Responsible for holding and safeguarding the mutual fund units

Registrar and Transfer They are the record keepers

Agents (RTA)

1.8 Different Types of Asset Management Companies

_____________________________________________________________________________________

Asset management companies come in many different forms and structures, such as:

1. Hedge funds:
A hedge fund is a pooled investment structure set up by a money manager or registered
investment advisor and designed to make a return. This pooled structure is often organized as
either a limited partnership or a limited liability company (LLC).
A hedge fund isn't a specific type of investment but rather a vehicle for investment. These funds
pool money from participants to invest in costly, high-risk, high-reward securities and other
opportunities. They are actively managed.
Hedge funds are designed to generate high returns. They are not regulated as closely as mutual
funds, which allow them to make investments that may come with a greater risk of loss. Hedge
funds are limited to wealthy investors and institutions, because they come with high fees paid to
their managers.1
There are hedge funds that:

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  Specialize in "long-only" equities, meaning that they only buy common stock and
never sell short
 Engage in private equity, which is the buying of entire privately held businesses, often
taking them over, improving operations, and later sponsoring an initial public offering
 Trade junk bonds
 Specialize in real estate
 Put money to work in specialized asset classes, such as patents or music copyrights

To operate, a hedge fund manager raises money from outside investors and invests those funds
according to whatever strategy they've promised to use.
A hedge fund will have an operating agreement that spells out how it will be managed. It will
include the fee structure, which is often a management fee of 1% to 2% of assets, plus a
performance fee of 20%, which means that the fund manager would get to take 20% of any
annual gains they make for you. The remainder would be your profit.1
A performance fee encourages fund managers to take risks that earn higher rewards. The more
money the fund earns, the more money both the investors and the fund manager get to take
home. Many hedge fund managers receive the standard "2 and 20." Other hedge fund managers
are paid on a pure profit arrangement.

Hedge funds are mostly unregulated investment pools that can only issue securities privately to
qualified investors. Alfred W. Jones is generally believed to have started the first hedge fund in
1949, pursuing a strategy of buying stocks and hedging the positions with short sales. Almost all
hedge funds use an asymmetrical compensation structure under which the managing partner
keeps 20 percent of the fund returns above a predetermined benchmark in addition to a 1–2
percent management fee. Such a fee structure makes it possible to receive extremely high
compensation—in 2005, at least two hedge fund managers earned more than $1 billion each.
Although funds must generate returns above the highest past value for the manager to earn
additional performance fees, many underperforming funds are simply closed. Because of the
high minimum investment, the limited liquidity, and the limited visibility of the strategies, due
diligence can be as high as $50,000 for an investor trying to choose a hedge fund. Funds of funds
have become popular as a means of diversifying those risks and sharing the costs.

Hedge funds seek inefficiencies in the market and attempt to correct them. The four most popular
types of hedge funds are long–short equity, event driven, macro, and fixed-income arbitrage.
Because the inefficiencies that are exploited are often small, many hedge funds use leverage to
amplify the return on each decision.

How Hedge Funds Are Categorized?

Each hedge fund is designed to take advantage of specific market opportunities. They can be
categorized into a number of broad hedge fund strategies such as event-driven investing and
fixed-income arbitrage. They are often classified according to the investment style of the fund's
manager.
Legally hedge funds are often set up as private investment limited partnerships that are open
only to a limited number of accredited investors and require a large initial minimum investment.

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Investments in hedge funds are illiquid as they often require investors to keep their money in
the fund for at least one year, a time known as the lock-up period. Withdrawals may also only
happen at certain intervals such as quarterly or bi-annually.

History of the Hedge Fund

Australian investor and financial writer Alfred Winslow Jones is credited with launching the
first hedge fund in 1949 through his company, A.W. Jones & Co.
He raised $100,000 (including $40,000 out of his own pocket) and set up a fund that aimed to
minimize the risk in long-term stock investing by short-selling other stocks. This innovation is
now referred to as the classic long/short equities model. Jones also employed leverage to
enhance the returns of his fund.

In 1952, Jones converted his fund from a general partnership to a limited partnership and added a
20% incentive fee as compensation for the managing partner.5
As the first money manager to combine short selling, the use of leverage, and a compensation
system based on performance, Jones earned his place in investing history as the father of the
hedge fund.

The Boom (and Bust) Years

In the 1960s, hedge funds dramatically outperformed most mutual funds. They were relatively
unknown to the general public until a 1966 article in Fortune highlighted an obscure fund that
outperformed every mutual fund on the market by double-digit figures over the previous year
and by high double-digits over the previous five years.

As hedge fund trends evolved, many funds turned away from Jones' strategy, which focused on
stock picking coupled with hedging and engaged in riskier strategies based on long-term
leverage. These tactics led to heavy losses in 1969-70, followed by a number of hedge fund
closures during the bear market of 1973-74.

The industry pretty much dropped off the radar for more than two decades until a 1986 article in
Institutional Investor touted the double-digit performance of Julian Robertson's Tiger Fund.
With a high-flying hedge fund once again capturing the public's attention, well-heeled investors
flocked to an industry that now offered thousands of funds and an ever-increasing array of
exotic strategies, including currency trading and derivatives such as futures and options.
High-profile money managers deserted the traditional mutual fund industry in droves in the
early 1990s, seeking fame and fortune as hedge fund managers.

Unfortunately, history repeated itself in the late 1990s and into the early 2000s as a number of
high-profile hedge funds, including Robertson's, failed in spectacular fashion.

The Hedge Fund Industry Today

The hedge fund industry has made a comeback since then. Total assets under management grew
from about $2.2 trillion in 2012 to about $3.6 trillion in 2019.

The number of operating hedge funds has grown as well, at least in some periods. There were
fewer than 5,000 hedge funds in 2002. The number passed 10,000 by the end of 2015. However,

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losses and underperformance led to liquidations. By 2019, the number of funds worldwide had
reached more than 16,000 according to Preqin.

Key Characteristics of Hedge Funds

How do you tell a hedge fund from a mutual fund? Here are a few big differences between the
two.
A. Hedge Funds Exclude Small Investors
Hedge funds can accept money only from "qualified" investors—individuals with an annual
income that exceeds $200,000 for the past two years or a net worth exceeding $1 million,
excluding their primary residence. Some set their minimums higher.
Those rules are imposed by the Securities and Exchange Commission because it otherwise does
not strictly regulate hedge funds. It considers qualified investors to be suitable to handle the
potential risks that hedge funds are permitted to take.

B. Hedge Fund Managers Have a Wide Latitude

A hedge fund's investment universe is limited only by its mandate. A hedge fund can basically
invest in anything—land, real estate, stocks, derivatives, and currencies.
Mutual funds, by contrast, stick to stocks or bonds and invest for the long term.

C. Hedge Funds Often Use Leverage

Hedge funds often use borrowed money to amplify their returns and allow them to take
aggressive short positions.
As was seen during the financial crisis of 2008, leverage can wipe out hedge funds, along with
other big chunks of the economy.

D. Hedge Funds Have a "2 and 20" Fee Structure

Mutual funds fees have fallen substantially in the last few years, hitting an average of 0.50% in
2020.
Hedge funds, by contrast, use a fee structure that is called, in shorthand, "2-and 20." That's 2% of
the assets under management plus a 20% cut of any profits generated.
Special Considerations on Hedge Funds
All hedge funds are considered risky investments, but some are riskier than others. Here are
some steps you should take if you are thinking about putting money into a hedge fund.

What are the types of hedge fund strategies?

Hedge funds are alternative investments that use market opportunities to their advantage. These
funds require a larger initial investment than many other types of investments and generally are
accessible only to accredited investors. That's because hedge funds require far less regulation
from the Securities and Exchange Commission (SEC) than others like mutual funds. Most hedge
funds are illiquid, meaning investors need to keep their money invested for longer periods of
time, and withdrawals are often limited to certain periods of time.
As such, they use different strategies so their investors can earn active returns. But potential
hedge fund investors need to understand how these funds make money and how much risk they
take on when they buy into this financial product. While no two hedge funds are identical, most
generate their returns using one or more of several specific strategies that we've outlined below.

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KEY TAKEWAYS
 Hedge funds are versatile investment vehicles that can use leverage, derivatives, and take
short positions in stocks.
 Because of this, hedge funds employ various strategies to try to generate active returns
for their investors.
 Hedge fund strategies range from long/short equity to market neutral.
 Merger arbitrage is a kind of event-driven strategy, which can also involve distressed
companies.

1. Long/Short Equity
The first hedge fund used a long/short equity strategy. Launched by Alfred W. Jones in 1949,
this strategy is still in use on the lion’s share of equity hedge fund assets today. The concept is
simple: Investment research turns up expected winners and losers, so why not bet on both?
Take long positions in the winners as collateral to finance short positions in the losers. The
combined portfolio creates more opportunities for idiosyncratic (i.e. stock-specific) gains,
reducing market risk with the shorts offsetting long market exposure.

The most common hedge fund strategy. Equity hedges balance long and short positions in the
public markets in order to drive higher return and reduce risk. There are three popular
subcategories: market neutral, long-short and short-long.

Long/short equity is basically an extension of pairs trading, in which investors go long and short
on two competing companies in the same industry based on their relative valuations. It is a
relatively low-risk leveraged bet on the manager’s stock-picking skill.

2. Event driven (or equity-driven)

Event-driven hedge funds mostly invest in stock and make investment when they believe a one-
time event in a company’s history will radically affect security prices. This could be an
acquisition or a bankruptcy. Popular event driven sub strategies include merger arbitrage and
distressed funds.

On the border between equity and fixed income lie event-driven strategies. This kind of strategy
works well during periods of economic strength when corporate activity tends to be high. With an
event-driven strategy, hedge funds buy the debt of companies that are in financial distress or have
already filed for bankruptcy. Managers often focus on senior debt, which is most likely to be
repaid at par or with the smallest haircut in any reorganization plan.

If the company has not yet filed for bankruptcy, the manager may sell short equity, betting that the
shares will fall either when it does file or when a negotiated equity-for-debt swap forestalls
bankruptcy. If the company is already in bankruptcy, a junior class of debt entitled to a lower
recovery upon reorganization may constitute a better hedge.

Investors in event-driven funds need to be able to take on some risk and also be patient.
Corporate reorganizations don't always happen the way managers plan, and, in some cases, they
may play out over months or even years, during which the troubled company’s operations may

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deteriorate. Changing financial-market conditions can also affect the outcome – for better or for
worse.

3. Global Macro
These funds invest in a much wider view of securities, from stocks, bonds, commodities and
derivatives. The play here is to predict how global forces (e.g., weather, politics, warfare) might
cause a shift in the financial markets.

Some hedge funds analyze how macroeconomic trends will affect interest rates, currencies,
commodities, or equities around the world, and take long or short positions in whichever asset
class is most sensitive to their views. Although global macro funds can trade almost anything,
managers usually prefer highly liquid instruments such as futures and currency forwards.

Macro funds don’t always hedge, but managers often take big directional bets—some never pan
out. As a result, returns are among the most volatile of any hedge fund strategy.

4. Relative value/ Market Neutral

A newer strategy that requires access to market data and looks for inconsistencies and errors in
how the market is pricing individual securities. It focuses more on market behavior rather than a
company.
Other hedge fund strategies are credit, risk parity, risk premia and fund of funds.

Long/short equity hedge funds typically have net long market exposure, because most managers
do not hedge their entire long market value with short positions. The portfolio's unhedged
portion may fluctuate, introducing an element of market timing to the overall return. By contrast,
market-neutral hedge funds target zero net-market exposure, or shorts and longs have an equal
market value. This means managers generate their entire return from stock selection. This
strategy has a lower risk than a long-biased strategy—but the expected returns are lower, too.
Long/short and market-neutral hedge funds struggled for several years after the 2007 financial
crisis. Investor attitudes were often binary—risk-on (bullish) or risk-off (bearish). Besides, when
stocks go up or down in unison, strategies that depend on stock selection don’t work. In addition,
record-low interest rates eliminated earnings from the stock loan rebate or interest earned on
cash collateral posted against borrowed stock sold short. The cash is lent out overnight, and the
lending broker keeps a proportion.

This typically amounts to 20% of the interest as a fee for arranging the stock loan, while
"rebating" the remaining interest to the borrower. If overnight interest rates are 4% and a market-
neutral fund earns the typical 80% rebate, it will earn 3.2% per annum (0.04 x 0.8) before fees,
even if the portfolio is flat. But when rates are near zero, so is the rebate.

5. Merger Arbitrage
A riskier version of market neutral, merger arbitrage derives its returns from takeover activity.
That's why it's often considered one kind of event-driven strategy. After a share-exchange
transaction is announced, the hedge fund manager may buy shares in the target company and

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short sell the buying company's shares at the ratio prescribed by the merger agreement. The deal
is subject to certain conditions:

 Regulatory approval
 A favorable vote by the target company's shareholders
 No material adverse change in the target’s business or financial position

The target company's shares trade for less than the merger consideration's per-share value—a
spread that compensates the investor for the risk of the transaction not closing, as well
as for the time value of money until closing.
In cash transactions, the target company shares trade at a discount to the cash payable at closing,
so the manager does not need to hedge. In either case, the spread delivers a return when the deal
goes through, no matter what happens to the market. The catch? The buyer often pays a large
premium over the pre-deal stock price, so investors face large losses when transactions fall apart.
There is, of course, significant risk that comes with this kind of strategy. The merger may not go
ahead as planned because of conditional requirements from one or both companies, and
regulations may eventually prohibit the merger. Those who take part in this kind of strategy
must, therefore, be fully knowledgeable about all the risks involved as well as the potential
rewards.

6. Convertible Arbitrage
Convertibles are hybrid securities that combine a straight bond with an equity option. A
convertible arbitrage hedge fund is typically long on convertible bonds and short on a proportion
of the shares into which they convert. Managers try to maintain a delta-neutral position, in which
the bond and stock positions offset each other as the market fluctuates. To preserve delta-
neutrality, traders must increase their hedge, or sell more shares short if the price goes up and
buy shares back to reduce the hedge if the price goes down. This forces them to buy low and sell
high.

Convertible arbitrage thrives on volatility. The more the shares bounce around, the more
opportunities arise to adjust the delta-neutral hedge and book trading profits. Funds thrive when
volatility is high or declining, but struggle when volatility spikes—as it always does in times of
market stress. Convertible arbitrage faces event risk as well. If an issuer becomes a takeover
target, the conversion premium collapses before the manager can adjust the hedge, resulting in a
significant loss.

7. Credit
Capital structure arbitrage, similar to event-driven trades, also underlies most hedge fund credit
strategies. Managers look for a relative value between the senior and junior securities of the
same corporate issuer. They also trade securities of equivalent credit quality from different
corporate issuers, or different tranches, in the complex capital of structured debt vehicles like
mortgage-backed securities (MBSs) or collateralized loan obligations (CLOs). Credit hedge
funds focus on credit rather than interest rates. Indeed, many managers sell short interest rate
futures or Treasury bonds to hedge their rate exposure.

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Credit funds tend to prosper when credit spreads narrow during robust economic growth periods.
But they may suffer losses when the economy slows and spreads blow out.

8. Fixed-Income Arbitrage
Hedge funds that engage in fixed-income arbitrage eke out returns from risk-free government
bonds, eliminating credit risk. Remember, investors who use arbitrage to buy assets or securities
on one market, then sell them on a different market. Any profit investors make is a result of a
discrepancy in price between the purchase and sale prices.

Managers, therefore, make leveraged bets on how the shape of the yield curve will change. For
example, if they expect long rates to rise relative to short rates, they will sell short long-dated
bonds or bond futures and buy short-dated securities or interest rate futures.
These funds typically use high leverage to boost what would otherwise be modest returns. By
definition, leverage increases the risk of loss when the manager is wrong.

9. Short-Only
The ultimate directional traders are short-only hedge funds—the professional pessimists who
devote their energy to finding overvalued stocks. They scour financial statement footnotes and
talk to suppliers or competitors to unearth any signs of trouble possibly ignored by investors.
Hedge fund managers occasionally score a home run when they uncover accounting fraud or
some other malfeasance.

Short-only funds can provide a portfolio hedge against bear markets, but they are not for the
faint of heart. Managers face a permanent handicap: They must overcome the long-term upward
bias in the equity market.

10. Quantitative
Quantitative hedge fund strategies look to quantitative analysis (QA) to make investment
decisions. QA is a technique that seeks to understand patterns using mathematical and statistical
modeling, measurement, and research relying on large data sets. Quantitative hedge funds often
leverage technology to crunch the numbers and automatically make trading decisions based on
mathematical models or machine learning techniques. These funds may be considered "black
boxes" since the internal workings are obscure and proprietary. High-frequency trading (HFT)
firms that trade investor money would be examples of quantitative hedge funds.

Advantages and Disadvantages of Hedge Funds

Advantages:
A. Aggressive Investment Strategies
One advantage to hedge funds is the aggressive strategies used by investors in order to get a high
return. For example, some aggressive investment strategies that can operate both on the U.S. and
international financial markets are called leverage, derivative, and long and short. Thus, as an
example of a leverage strategy, investors will borrow and trade money on top of the capital they
gain. This strategy can enhance return, but the chance for big gains must be measured alongside
the potential for huge loss, and so those using this strategy will also employ complex risk
management tools to reduce possible associated risk.

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B. Huge Gains
One other advantage to hedge funds is the large amount of money that can be made by utilizing
them within your portfolio. The aim of hedge funds is to acquire a high-return despite what
market fluctuations are occurring at any given period. For example, one type of hedge fund
strategy is called a “global macro” approach. This strategy attempts to take a large position in
commodities, stocks, bonds, etc., by forecasting what investment opportunities one can take in
relation to what may happen in future global economic events. This is done in order to create the
largest return with the least amount of risk.

C. Expert Advice
There is a very good reason why those working in hedge fund investing, such as a hedge fund
manager, are paid handsomely. Aside from just the big gains that can be made on such
investments, these individuals are extremely experienced and knowledgeable in matters of
financial investment; thus when you invest in hedge funds you are getting expert advice as to not
only which hedge funds to use, but when (anticipated market fluctuations) and where (domestic
versus international), which can easily ensure you a greater chance of receiving a large return on
your investment.

Disadvantages:
A. Large Investment Fees
One major disadvantage of hedge funds, and a highly criticized one as well, is the often high fees
one must pay in order to invest in hedge funds. For example, hedge fund investors typically
charge both a performance fee on top of a management fee. A management fee is usually 2% of
the net value of the fund, and is paid typically every month. Regarding performance fees, they
are typically 20% of whatever the fund earns in any given year. Performance fees are mainly
used to motivate managers to create as big of a profit as they can.

B. Standard Deviation
Another disadvantage to hedge funds is the use of the statistical tool known as the standard
deviation. This is a very common tool used to anticipate the risk in investing in a particular
hedge fund. So, the standard deviation measures the volatility of possible gains, expressed as a
certain percentage per year. The statistic can provide a good measure of potential variation in
gains during the year, however the downside is that the standard deviation cannot indicate the
overall big picture of the risk of return; mainly because hedge funds do not operate under a bell-
curve, or normally-distributed rate of return.

C. Downside Capture
The downside capture is a risk management measure used to assess what level of correlation a
hedge fund has to a specific market when that particular market is on the decline. The smaller the
downside capture measure of a fund, the better equipped the hedge fund is to handle a market
decline. However, the disadvantage is that all funds are compared to a unified benchmark for the
market. So, if a hedge fund manager uses a wildly different style of investing than the
benchmark, the downside capture ratio may, for example, show that the fund is under-performing
the benchmark, even if the market index generates high returns.

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D. Drawdown
The drawdown is basically a statistic that provides an estimation in the overall rate of return on an
investment compared to that investment’s most recent highest return, a peak-to-valley ratio.
The disadvantage to this measure is related to the disadvantage that the standard deviation has
with a hedge fund, mainly that hedge funds do not operate very consistently and predictably in
order for the standard deviation, and thus the drawdown, to be very useful.

E. Leverage
Leverage is an investment measure that’s often overlooked as being the main factor in hedge
funds acquiring large losses. Basically, when leverage rises, any downsides in investment returns
are magnified, often causing the hedge fund to sell off its assets at a cheap price. Leverage is
typically a main reason why so many hedge funds go bankrupt.

2. Mutual funds:
A mutual fund is a collection of stocks, bonds, or other securities. When you buy a mutual fund,
you own the share of the mutual fund. The price of each mutual fund share is called its NAV
or net asset value. That's the total value of all the securities it owns divided by the number of the
mutual fund's shares. Mutual fund shares are traded continuously, but their prices adjust at the
end of each business day.

Mutual funds have less risk than buying individual securities because they are diversified
investments. Mutual funds charge annual management fees, which guarantees they will cost
more than the underlying stocks.

A good mutual fund reflects how an industry or other sector is doing. Mutual fund values change
on a daily basis. That demonstrates the value of the assets in the fund's portfolio. The economy is
much slower-moving so that wide variations in a fund don't always mean that sector is gyrating as
much. But if a mutual fund price declines over time, then it is a good bet that the industry it tracks
is also growing more slowly.

KEY TAKEWAYS

 A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds,

or other securities.
 Mutual funds give small or individual investors access to diversified, professionally
managed portfolios at a low price.
 Mutual funds are divided into several kinds of categories, representing the kinds of
securities they invest in, their investment objectives, and the type of returns they seek.
 Mutual funds charge annual fees (called expense ratios) and, in some cases,
commissions, which can affect their overall returns.
 The overwhelming majority of money in employer-sponsored retirement plans goes into
mutual funds

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Understanding Mutual Funds
Mutual funds pool money from the investing public and use that money to buy other securities,
usually stocks and bonds. The value of the mutual fund company depends on the performance of
the securities it decides to buy. So, when you buy a unit or share of a mutual fund, you are
buying the performance of its portfolio or, more precisely, a part of the portfolio's value.
Investing in a share of a mutual fund is different from investing in shares of stock. Unlike stock,
mutual fund shares do not give its holders any voting rights. A share of a mutual fund represents
investments in many different stocks (or other securities) instead of just one holding.

That's why the price of a mutual fund share is referred to as the net asset value (NAV) per share,
sometimes expressed as NAVPS. A fund's NAV is derived by dividing the total value of the
securities in the portfolio by the total amount of shares outstanding. Outstanding shares are those
held by all shareholders, institutional investors, and company officers or insiders. Mutual fund
shares can typically be purchased or redeemed as needed at the fund's current NAV, which—
unlike a stock price—doesn't fluctuate during market hours, but it is settled at the end of each
trading day. Ergo, the price of a mutual fund is also updated when the NAVPS is settled.

The average mutual fund holds over a hundred different securities, which means mutual fund
shareholders gain important diversification at a low price. Consider an investor who buys only
Google stock before the company has a bad quarter. He stands to lose a great deal of value
because all of his dollars are tied to one company. On the other hand, a different investor may buy
shares of a mutual fund that happens to own some Google stock. When Google has a bad quarter,
she loses significantly less because Google is just a small part of the fund's portfolio.

How Mutual Funds Work?

A mutual fund is both an investment and an actual company. This dual nature may seem strange,
but it is no different from how a share of AAPL is a representation of Apple Inc. When an
investor buys Apple stock, he is buying partial ownership of the company and its assets.
Similarly, a mutual fund investor is buying partial ownership of the mutual fund company and its
assets. The difference is that Apple is in the business of making innovative devices and tablets,
while a mutual fund company is in the business of making investments.

Investors typically earn a return from a mutual fund in three ways:

1. Income is earned from dividends on stocks and interest on bonds held in the fund's
portfolio. A fund pays out nearly all of the income it receives over the year to fund
owners in the form of a distribution. Funds often give investors a choice either to receive a
check for distributions or to reinvest the earnings and get more shares.
2. If the fund sells securities that have increased in price, the fund has a capital gain. Most
funds also pass on these gains to investors in a distribution.
3. If fund holdings increase in price but are not sold by the fund manager, the fund's shares
increase in price. You can then sell your mutual fund shares for a profit in the market.

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If a mutual fund is construed as a virtual company, its CEO is the fund manager, sometimes
called its investment adviser. The fund manager is hired by a board of directors and is legally
obligated to work in the best interest of mutual fund shareholders. Most fund managers are also
owners of the fund. There are very few other employees in a mutual fund company. The
investment adviser or fund manager may employ some analysts to help pick investments or
perform market research. A fund accountant is kept on staff to calculate the fund's NAV, the
daily value of the portfolio that determines if share prices go up or down. Mutual funds need to
have a compliance officer or two, and probably an attorney, to keep up with government
regulations.

Most mutual funds are part of a much larger investment company; the biggest have hundreds of
separate mutual funds. Some of these fund companies are names familiar to the general public,
such as Fidelity Investments, The Vanguard Group, T. Rowe Price, and Oppenheimer.

Why do people buy mutual funds?

Mutual funds are a popular choice among investors because they generally offer the following
features:

 Professional Management. The fund managers do the research for you. They select the
securities and monitor the performance.
 Diversification or “Don’t put all your eggs in one basket.” Mutual funds typically invest
in a range of companies and industries. This helps to lower your risk if one company
fails.
 Affordability. Most mutual funds set a relatively low dollar amount for initial investment
and subsequent purchases.
 Liquidity. Mutual fund investors can easily redeem their shares at any time, for the
current net asset value (NAV) plus any redemption fees.

Types of Mutual Funds

Mutual funds are divided into several kinds of categories, representing the kinds of securities
they have targeted for their portfolios and the type of returns they seek. There is a fund for
nearly every type of investor or investment approach. Other common types of mutual funds
include money market funds, sector funds, alternative funds, smart-beta funds, target-date
funds, and even funds of funds, or mutual funds that buy shares of other mutual funds.

1. Equity Funds
The largest category is that of equity or stock funds. As the name implies, this sort of fund
invests principally in stocks. Within this group are various subcategories. Some equity funds are
named for the size of the companies they invest in: small-, mid-, or large-cap. Others are named
by their investment approach: aggressive growth, income-oriented, value, and others. Equity
funds are also categorized by whether they invest in domestic (U.S.) stocks or foreign equities.
There are so many different types of equity funds because there are many different types of

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equities. A great way to understand the universe of equity funds is to use a style box, an example
of which is below.

The idea here is to classify funds based on both the size of the companies invested in
(their market caps) and the growth prospects of the invested stocks. The term value fund refers to
a style of investing that looks for high-quality, low-growth companies that are out of favor with
the market. These companies are characterized by low price-to-earnings (P/E) ratios, low price- to-
book (P/B) ratios, and high dividend yields. Conversely, spectrums are growth funds, which
look to companies that have had (and are expected to have) strong growth in earnings, sales, and
cash flows. These companies typically have high P/E ratios and do not pay dividends. A
compromise between strict value and growth investment is a "blend," which simply refers to
companies that are neither value nor growth stocks and are classified as being somewhere in the
middle.

The other dimension of the style box has to do with the size of the companies that a mutual fund
invests in. Large-cap companies have high market capitalizations, with values over $10 billion.
Market cap is derived by multiplying the share price by the number of shares outstanding. Large-
cap stocks are typically blue chip firms that are often recognizable by name. Small-cap
stocks refer to those stocks with a market cap ranging from $300 million to $2 billion. These
smaller companies tend to be newer, riskier investments. Mid-cap stocks fill in the gap between
small- and large-cap.

A mutual fund may blend its strategy between investment style and company size. For example, a
large-cap value fund would look to large-cap companies that are in strong financial shape but
have recently seen their share prices fall and would be placed in the upper left quadrant of the
style box (large and value). The opposite of this would be a fund that invests in startup
technology companies with excellent growth prospects: small-cap growth. Such a mutual fund
would reside in the bottom right quadrant (small and growth).

Types of Equity Mutual Funds

There are various ways of categorizing equity funds. Here is a look at the different
categorizations:

Investment Strategy-based Categorization

1. Theme and Sectoral Funds – An Equity Fund might decide to follow a specific investment
theme like an international stock theme or emerging market theme, etc. Also, some schemes
might invest in a particular sector of the market like BFSI, IT, Pharmaceutical, etc. Here, it is
important to note that sector or theme-based funds carry a higher risk since they focus on a
specific sector or theme.

2. Focused Equity Fund – This fund invests in a maximum of 30 stocks of companies having
market capitalization as specified at the time of the launch of the scheme.

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3. Contra Equity Fund – As the name suggests, these schemes follow a contrarian strategy of
investing. These schemes analyze the market to find under-performing stocks and purchase them
at low prices under the assumption that these stocks will recover in the long term.

Market Capitalization-based Categorization

Some schemes might decide to invest in companies with specific market capitalizations only.
Here are the common types:

 Large-Cap Funds – which typically invest a minimum of 80% of their total assets in
equity shares of large-cap companies (the top 100). These schemes are considered to be
more stable than the mid-cap or small-cap focused funds.

 Mid-Cap Funds – which usually invest around 65% of their total assets in equity shares of
mid-cap companies (101-250th placed companies according to market capitalization).
These schemes tend to offer better returns than the large-cap schemes but are also more
volatile than them.

 Small-Cap Funds – which typically invest around 65% of their total assets in equity
shares of small-cap companies (251st and below placed companies according to market
capitalization). This is a huge list and more than 95% of all companies in India fall into
this category. These schemes tend to offer great returns than the large-cap and mid-cap
schemes but are also highly volatile.

 Multi-Cap Funds – which usually invest around 65% of their total assets in equity shares
of large-cap, mid-cap and small-cap companies in varying proportions. In these schemes,
the fund manager keeps rebalancing the portfolio to match the market and economic
conditions as well as the investment objective of the scheme.

 Large and Mid-Cap Funds – which usually invest around 35% of their total assets in
equity shares of mid-cap companies and 35% in large-cap companies. These schemes
offer a great blend of lower volatility and better returns.

Tax Treatment – Based Categorization

Equity Linked Savings Scheme (ELSS) – ELSS Funds is the only equity scheme which offers
tax benefits of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. These schemes
invest a minimum of 80% of its total assets in equity and equity related instruments. Further,
these schemes have a lock-in period of 3 years.

Non-Tax Saving Equity Funds – Except ELSS, all other Equity Funds are non-tax saving
schemes. This means that the returns are subject to capital gains tax.

Investment Style-based Categorization

 Active Funds – These schemes are actively managed by the fund managers who handpick
the stocks that they want to invest in.

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  Passive Funds – These schemes usually track a market index or segment which
determines the list of stock that the scheme will invest in. In these schemes, the fund
manager has no active role in the selection of the stocks.

How Does an Equity Mutual Fund work?

A Mutual Fund scheme is classified as an Equity Mutual Fund if it invests more than
60% (sixty percent) of its total assets in the equity shares of different companies. The
balance amount can be invested in money market instruments or debt securities as per the
investment objective of the scheme. Further, the fund manager can choose to invest in a
growth-oriented or value-oriented manner and select companies according to his
assessment of the investment generating maximum returns

How should you invest in an Equity Mutual Fund?

Like any other investment decision, you must assess your financial goals, risk tolerance, and
investment horizon carefully before signing the dotted line. For the sake of understanding, we
have divided the investors into two broad categories – the new entrants and seasoned investors.

If you are investing in Equity Funds for the first time…

Many new investors are wary of investing in the capital market since they have little capital to
invest (young investors) or lack time to constantly monitor their investments (a must for share
investments) or lack the expertise to choose the right shares. Hence, they turn to equity mutual
funds. However, there are many types of equity funds available and choosing the right one can
still be a challenge. We recommend most new investors to opt for Large-Cap Equity Funds.
These schemes typically invest in the shares of the best companies in the market and have a
history of generating consistent returns.

If you are a seasoned investor…

There is nothing much that we can say that you don’t already know! However, we recommend
you to opt for diversified equity funds and take calculated risks. Your understanding of the
market can help you choose the right scheme and earn higher returns as compared to other equity
funds.

Features of an Equity Fund

Here are some salient features of Equity Mutual Funds in India:

Lower Expense Ratio

In an Equity Fund, regular buying and selling of shares can lead to an increase in the expense
ratio of the scheme. The Securities and Exchanges Board of India (SEBI) has created an upper
limit for the expense ratio of equity funds at 2.5%. Also, SEBI might reduce it further. This
means more returns for investors.

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Tax Exemption under Section 80C
The Equity Linked Savings Scheme or ELSS offers tax exemption under Section 80C of the
Income Tax Act with exposure to equity. It has a small lock-in period of 3 years and offers great
potential for earning good returns. You can also invest in an ELSS in installments.

Portfolio Diversification
Equity Funds allow you to gain exposure to several good equity shares by investing a small
amount. Hence, your equity portfolio is diversified and offers a better opportunity of earning
good returns.

Benefits of investing in Equity Mutual Funds

Equity Funds allow you to invest in the capital market without having to worry about choosing
individual stocks or sectors. Traditionally, investors with a sound knowledge of the market
would earn great returns in the equity market. However, Equity Mutual Funds employ expert
fund managers to research for you.

Here are some advantages of investing in Equity Funds:

 Your investment is managed by experts
 It is cost-efficient
 Convenient
 It offers diversification
 You can opt for systematic investments (installments)
 It offers flexibility and liquidity

Taxation rules of Equity Funds?

In the case of Equity Funds, the taxation rules are as follows:

 Capital Gains Tax

If you hold the units of the scheme for a period of up to one year, then the capital gains earned by you are
called short-term capital gains or STCG. STCG is taxed at 15%.
If you hold the units of the scheme for more than one year, then the capital gains earned by you are called
long-term capital gains or LTCG. LTCG above Rs.1 lakh is taxed at 10% without indexation benefits.

 Dividend Distribution Tax (DDT)

This tax is deducted at source. Hence, when the mutual fund pays out dividends, it deducts DDT of 10%
before distributing the dividend

2. Fixed-Income Funds/Gilt Funds

Another big group is the fixed income category. A fixed-income mutual fund focuses on
investments that pay a set rate of return, such as government bonds, corporate bonds, or other
debt instruments. The idea is that the fund portfolio generates interest income, which it then
passes on to the shareholders.

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Sometimes referred to as bond funds, these funds are often actively managed and seek to buy
relatively undervalued bonds in order to sell them at a profit. These mutual funds are likely to pay
higher returns than certificates of deposit and money market investments, but bond funds aren't
without risk. Because there are many different types of bonds, bond funds can vary
dramatically depending on where they invest. For example, a fund specializing in high-yield
junk bonds is much riskier than a fund that invests in government securities. Furthermore,
nearly all bond funds are subject to interest rate risk, which means that if rates go up, the value of
the fund goes down.

How do Gilt Mutual Funds work?

Whenever the State or Central Government requires funds, it asks the apex bank of the country –
The Reserve bank of India (RBI) – which is also the Government’s banker. RBI collects the
required funds from banks and insurance organizations and lends it to the state/central
governments. In exchange, the Reserve bank of India issues g-secs or government securities with
a fixed tenure. Gilt Funds subscribe to these securities. Once the security matures, the fund
returns it and receives a payout.
For most conservative investors, Gilt funds are a perfect combination of reasonable returns and
minimal risks. However, it is important to note that Gilt Funds are affected by the changes in
interest rates.

Should you invest in Gilt Mutual Funds?

Unlike bond funds which may invest in corporate bonds, Gilt Funds solely invest in g-secs or
government securities. This makes Gilt Mutual Funds low-risk investments which offer
reasonable returns along with capital preservation. Hence, they are a good investment option for
people with lower risk tolerance and seeking investment opportunities in government securities.

Factors to consider before investing in Gilt Mutual Funds in India

Here are some important aspects that you must consider before investing in gilt funds in India:
 Risks
Gilt Funds carry no credit risk as they are issued by the government who never defaults on its
payments. However, these funds carry the risk of changing interest rates. If the interest rates rise
sharply, the NAV of a Gilt Fund falls drastically.
 Returns
Since the gains from a Gilt Fund depend on the interest rates changes, they cannot be guaranteed.
However, in a falling interest rate regime, Gilt Funds can offer up to 12% returns. If the economy
slumps, Gilt Funds can offer better returns than equity funds too!
 Expense Ratio
Like all other mutual funds, Gilt Funds also charge a fee for providing fund management
services. This fee is called expense ratio – a percentage of the fund’s total assets. This can vary
depending on the investment strategy of the fund manager. Look for a fund with a low expense
ratio so that you can maximize your gains.
 Investment Plan
On average, the maturity of a Gilt Mutual Fund is between three and five years. Therefore, you
must have a similar investment horizon to invest in these funds. Further, these funds can help
you generate wealth over the medium tenure. Also, if the interest rates are in a falling cycle, then

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you can earn good returns in the shorter term too. Ensure that you create an investment plan
accordingly.

3. Index Funds

Another group, which has become extremely popular in the last few years, falls under the
moniker "index funds." Their investment strategy is based on the belief that it is very hard, and
often expensive, to try to beat the market consistently. So, the index fund manager buys stocks
that correspond with a major market index such as the S&P 500 or the Dow Jones Industrial
Average (DJIA), BSE SENSEX, NSE NIFTY. This strategy requires less research from analysts
and advisors, so there are fewer expenses to eat up returns before they are passed on to
shareholders. These funds are often designed with cost-sensitive investors in mind

4. Hybrid Funds

Investments can be broadly classified into three types based on risk – equity (or high-risk)
investments, debt (or low-risk) investments, and hybrid investments. Most investment advisors
ask investors to create an investment plan based on their financial goals, risk tolerance, and
investment horizon. Every individual has different needs and aspirations and hence it is difficult
to classify an investor as a purely high-risk or low-risk-taker. This is where Hybrid Mutual Funds
step in. here, we will explore Hybrid Funds and talk about some essential features that you need to
know before investing in them.

Balanced funds invest in a hybrid of asset classes, whether stocks, bonds, money market
instruments, or alternative investments. The objective is to reduce the risk of exposure across
asset classes. This kind of fund is also known as an asset allocation fund. There are two
variations of such funds designed to cater to the investor’s objectives.

Some funds are defined with a specific allocation strategy that is fixed, so the investor can have a
predictable exposure to various asset classes. Other funds follow a strategy for dynamic
allocation percentages to meet various investor objectives. This may include responding to
market conditions, business cycle changes, or the changing phases of the investor's own life.

While the objectives are similar to those of a balanced fund, dynamic allocation funds do not
have to hold a specified percentage of any asset class. The portfolio manager is therefore given
freedom to switch the ratio of asset classes as needed to maintain the integrity of the fund's
stated strategy.

How does a Hybrid Fund work?

A hybrid fund endeavors to create a balanced portfolio to offer regular income to its investors
along with capital appreciation in the long-term. The fund manager creates a portfolio according
to the investment objective of the scheme and allocates the funds in equity and debt instruments in
varying proportions. Further, the fund manager also buys or sells assets if the market
movements are favorable.

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Who should invest in a Hybrid Mutual Fund?
Hybrid funds are considered to be riskier than debt funds but safer than equity funds. They tend to
offer better returns than debt funds and are preferred by many low-risk investors. Further, new
investors who are unsure about stepping into the equity markets tend to turn towards hybrid
funds. This is because the debt component offers stability while they test the equity ‘waters’.
Hybrid funds allow investors to make the most out of equity investments while cushioning
themselves against extreme volatility in the market.

Types of Hybrid Funds

Since every hybrid fund can have a different asset allocation between equity and debt, they can be
classified into the following types:

A. Equity-oriented Hybrid Funds

An equity-oriented hybrid fund invests at least 65% of its total assets in equity and equity-related
instruments of companies across various market capitalizations and sectors. The remaining 35% is
invested in debt securities and money market instruments.

B. Debt-oriented Hybrid Funds

A debt-oriented hybrid fund invests at least 60% of its total assets in fixed-income securities like
bonds, debentures, government securities, etc. The remaining 40% is invested in equity. Some
funds also invest a small part of their corpus in liquid schemes.

C. Balanced Funds
These funds invest a minimum of 65% of their total assets in equity and equity-related
instruments and the rest in debt securities and cash. For taxation, they are considered to be equity
funds and offer tax exemption on long-term capital gains of up to Rs. 1 lakh. The fixed income
component makes it a good option for equity investors as it helps mitigate the volatility of equity
investments.

D. Monthly Income Plans

Monthly Income Plans are hybrid funds which primarily invest in fixed income securities and
allocate a small portion of their corpus to equity and equity-related instruments. This allows
these plans to generate better returns than pure debt schemes and allows the fund to offer regular
income to investors. Most plans also offer a growth option where the income grows in the fund’s
corpus.

E. Arbitrage Funds
Arbitrage funds buy stocks at a lower price in one market and sell it at a higher price in another.
The fund manager constantly keeps looking for arbitrage opportunities and maximizes the fund’s
returns. However, there are times when good arbitrage opportunities are not available. During
such times, the fund invests primarily in debt securities and cash. Arbitrage funds are considered
to be as safe as debt funds. However, long-term capital gains are taxed like equity funds.

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Factors to consider before investing in Hybrid Mutual Funds in India

Here are some important aspects that you must consider before investing in hybrid funds in
India:

A. The Risk-Return Assessment

Hybrid funds carry an investment risk proportionate to the allocation of assets in its portfolio.
Hence, it is important to analyze the portfolio of the scheme carefully to get a good
understanding of the risks involved. For example, if you are investing in an equity-oriented
hybrid fund, then you must look at the kind of stocks the fund owns. Are the majorly large-caps or
small/mid-caps? This helps you understand the risks better. Further, it will also give you an
idea of the kind of returns that you can expect.

B. Choose the right Hybrid Fund

Since hybrid funds come in different types, it is important to consider your risk tolerance,
financial goals, and investment horizon before choosing a scheme. If you need regular income,
then opting for a debt-oriented hybrid fund might offer better returns than a pure debt fund due to
the added equity component. Ensure that you consider these factors before investing.

C. Debt component of the Hybrid Fund

This is taxed like any pure debt fund. The capital gains are added to your income and taxed as per
the applicable income tax slab. Long-term capital gains from the debt component are taxed at
20% after indexation and 10% without indexation benefits

5. Money Market Funds

The money market consists of safe (risk-free), short-term debt instruments, mostly
government Treasury bills. This is a safe place to park your money. You won't get substantial
returns, but you won't have to worry about losing your principal. A typical return is a little more
than the amount you would earn in a regular checking or savings account and a little less than the
average certificate of deposit (CD). While money market funds invest in ultra-safe assets,
during the 2008 financial crisis, some money market funds did experience losses after the share
price of these funds, typically pegged at $1, fell below that level and broke the buck.
Money Market Funds are short-term debt funds. They invest in various money market
instruments and endeavor to offer good returns over a period of up to one year while maintaining
high levels of liquidity. The average maturity of a Money Market Fund is one year.

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Types of Money Market Instruments

Money Market is an exchange where the trade of cash and cash-equivalent instruments takes
place. The instruments that are traded in the money markets have maturities which can vary from
overnight to one year. Here are some key money market instruments in India:

 Treasury Bills or T-Bills

The Government of India issues treasury bills to raise funds for a period of up to 365 days. Since
these are issued by the government, they are considered to be very safe. However, lower risks
also translate into lower returns which is the case with treasury bills too. The returns on T-bills is
lower than other money market instruments.

 Certificate of Deposit or CD
A CD is a term deposit which is offered by scheduled commercial banks which does not have the
option of premature redemption. The primary difference between a CD and FD is that CDs are
freely negotiable.

 Repurchase Agreements or Repos

A repurchase agreement is made between a bank and RBI to facilitate short-term loans. It can
also be made between two banks.

 Commercial Paper or CP
Companies and financial institutions with a high credit rating can issue a commercial paper
which is a short-term, unsecured promissory note. It allows such entities to diversify their short-
term borrowing sources. CPs are usually issued at a discounted rate while the redemption is done
on face value. The investor earns the difference.

How do Money Market Funds work?

A money market fund invests in money market instruments with an objective of offering good
returns (interest income) and keeping the NAV fluctuations minimal.
Based on the performance over the last five years, here are the best money market funds in India:
Note: Remember, this is not a recommendation but a list of well-performing money market funds
in India. Ensure that you follow your investment plan before investing.

Who should invest in a Money Market Fund?

Since these schemes invest in money market instruments, they are ideal for investors with lower
risk tolerance and an investment horizon of up to one year. Typically, investors with idle cash
lying in their savings account can earn better returns by investing in these funds. It is important to
note that these funds are recommended to investors having short-term cash surplus which they
won’t need urgently.

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Factors to consider before investing in Money Market Funds in India

Here are some important aspects that you must consider before investing in money market funds
in India:

 Risks and Returns

Money Market Funds are debt funds and hence carry all the risks applicable to debt funds like
interest rate risk and credit risk. Additionally, the fund manager might invest in instruments with a
slightly higher risk component to increase returns. Usually, money market funds tend to offer
better returns than a regular savings account. The Net Asset Value or NAV of these funds
changes with a change in the interest rate regime.

 Expense Ratio
Since the returns are not very high, the expense ratio plays an important role in determining your
earnings from a money market fund.
‘Expense Ratio is a small percentage of the total assets of the fund charged by the fund house
towards fund management services.’
Ideally, you should look for funds with a lower expense ratio to maximize your returns.

Invest according to your Investment Plan

Usually, money market funds are recommended to investors with an investment horizon of 90-
365 days. These schemes can help you diversify your portfolio and help invest surplus cash
while maintaining liquidity. Ensure that you invest according to your investment plan.

6. Income Funds
Income funds are named for their purpose: to provide current income on a steady basis. These
funds invest primarily in government and high-quality corporate debt, holding these bonds until
maturity in order to provide interest streams. While fund holdings may appreciate in value, the
primary objective of these funds is to provide steady cash flow to investors. As such, the
audience for these funds consists of conservative investors and retirees. Because they produce
regular income, tax-conscious investors may want to avoid these funds.

7. International/Global Funds
An international fund (or foreign fund) invests only in assets located outside your home
country. Global funds, meanwhile, can invest anywhere around the world, including within your
home country. It's tough to classify these funds as either riskier or safer than domestic
investments, but they have tended to be more volatile and have unique country and political
risks. On the flip side, they can, as part of a well-balanced portfolio, actually reduce risk by
increasing diversification, since the returns in foreign countries may be uncorrelated with
returns at home. Although the world's economies are becoming more interrelated, it is still
likely that another economy somewhere is outperforming the economy of your home country.

8. Specialty Funds
This classification of mutual funds is more of an all-encompassing category that consists of
funds that have proved to be popular but don't necessarily belong to the more rigid categories
we've described so far. These types of mutual funds forgo broad diversification to concentrate

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on a certain segment of the economy or a targeted strategy. Sector funds are targeted strategy
funds aimed at specific sectors of the economy, such as financial, technology, health, and so on.
Sector funds can, therefore, be extremely volatile since the stocks in a given sector tend to be
highly correlated with each other. There is a greater possibility for large gains, but a sector may
also collapse (for example, the financial sector in 2008 and 2009).

Regional funds make it easier to focus on a specific geographic area of the world. This can
mean focusing on a broader region (say Latin America) or an individual country (for example,
only Brazil). An advantage of these funds is that they make it easier to buy stock in foreign
countries, which can otherwise be difficult and expensive. Just like for sector funds, you have to
accept the high risk of loss, which occurs if the region goes into a bad recession.

Socially responsible funds (or ethical funds) invest only in companies that meet the criteria of
certain guidelines or beliefs. For example, some socially responsible funds do not invest in "sin"
industries such as tobacco, alcoholic beverages, weapons, or nuclear power. The idea is to get
competitive performance while still maintaining a healthy conscience. Other such funds invest
primarily in green technology, such as solar and wind power or recycling.

Mutual Funds based on Investment Goals

You can also choose a fund based on your financial objective:

• Growth funds:
Funds that invest primarily in high-performing stocks with the aim of capital appreciation are
considered growth funds. These funds can be an attractive option for investors seeking high
returns over a long period.

• Tax-saving Funds (ELSS):

Equity-linked saving schemes are mutual funds that invest mostly in company securities.
However, they qualify for tax deductions under Section 80C of the Income Tax Act. They have a
minimum investment horizon of three years.

• Liquidity-based funds:
Some funds can be categorized based on how liquid the investments are. Ultra-short-term
and liquid funds, are ideal for short-term goals, while schemes like retirement funds have longer
lock-in periods.
• Capital protection funds:
These funds invest partially in fixed income instruments and the rest into equities. This could
ensure capital protection, i.e., minimal loss, if any. However, returns are taxable.

• Fixed-maturity funds (FMF):

These funds route money into debt market instruments, which have either the same or a similar
maturity period as the fund itself. For instance, a three-year FMF will invest in securities with a
maturity of three years or lower

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• Pension Funds:
Pension funds invest with the idea of providing regular returns after a long period of investment.
They are usually hybrid funds that give low but have potential to provide steady returns in future.

Structure of Mutual Funds

Based on the ease of investment, mutual funds can be:

• Open-ended funds:
These funds do not limit when or how many units can be purchased. Investors can enter or exit
throughout the year at the current net asset value. Open-ended funds are ideal for investors
seeking liquidity.

• Close-ended funds:
Close-ended funds have a pre-decided unit capital amount and also allow purchase only during a
specified period. Here, redemption is bound by the maturity date. However, to facilitate liquidity,
schemes trade on stock exchanges.

• Interval funds:
A cross between open-ended and close-ended funds, interval mutual funds permit transactions at
specific periods. Investors can choose to purchase or redeem their units when the trading window
opens up.

Mutual Fund Fees

A mutual fund will classify expenses into either annual operating fees or shareholder fees.
Annual fund operating fees are an annual percentage of the funds under management, usually
ranging from 1–3%. Annual operating fees are collectively known as the expense ratio. A fund's
expense ratio is the summation of the advisory or management fee and its administrative costs.

Shareholder fees, which come in the form of sales charges, commissions, and redemption fees, are
paid directly by investors when purchasing or selling the funds. Sales charges or
commissions are known as "the load" of a mutual fund. When a mutual fund has a front-
end load, fees are assessed when shares are purchased. For a back-end load, mutual fund fees
are assessed when an investor sells his shares.

Sometimes, however, an investment company offers a no-load mutual fund, which doesn't carry
any commission or sales charge. These funds are distributed directly by an investment
company, rather than through a secondary party.

Some funds also charge fees and penalties for early withdrawals or selling the holding before a
specific time has elapsed. Also, the rise of exchange-traded funds, which have much lower fees

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thanks to their passive management structure, have been giving mutual funds considerable
competition for investors' dollars. Articles from financial media outlets regarding how fund
expense ratios and loads can eat into rates of return have also stirred negative feelings about
mutual funds.

As with any business, running a mutual fund involves costs. Funds pass along these costs to
investors by charging fees and expenses. Fees and expenses vary from fund to fund. A fund with
high costs must perform better than a low-cost fund to generate the same returns for you.

Even small differences in fees can mean large differences in returns over time. For example, if
you invested $10,000 in a fund with a 10% annual return, and annual operating expenses of
1.5%, after 20 years you would have roughly $49,725. If you invested in a fund with the same
performance and expenses of 0.5%, after 20 years you would end up with $60,858.

It takes only minutes to use a mutual fund cost calculator to compute how the costs of different
mutual funds add up over time and eat into your returns. See the Mutual Fund Glossary for types
of fees.

Advantages:

A. Advanced Portfolio Management

When you buy a mutual fund, you pay a management fee as part of your expense ratio, which is
used to hire a professional portfolio manager who buys and sells stocks, bonds, etc.1 This is a
relatively small price to pay for getting professional help in the management of an investment
portfolio.

B. Dividend Reinvestment
As dividends and other interest income sources are declared for the fund, they can be used to
purchase additional shares in the mutual fund, therefore helping your investment grow.

C. Risk Reduction (Safety)

Reduced portfolio risk is achieved through the use of diversification, as most mutual funds will
invest in anywhere from 50 to 200 different securities—depending on the focus. Numerous
stock index mutual funds own 1,000 or more individual stock positions.

D. Convenience and Fair Pricing

Mutual funds are easy to buy and easy to understand. They typically have low minimum
investments and they are traded only once per day at the closing net asset value (NAV).1 This
eliminates price fluctuation throughout the day and various arbitrage opportunities that day
traders practice.

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Disadvantages

A. High Expense Ratios and Sales Charges

If you're not paying attention to mutual fund expense ratios and sales charges, they can get out of
hand. Be very cautious when investing in funds with expense ratios higher than 1.50%, as
they are considered to be on the higher cost end. Be wary of advertising fees and sales charges in
general. There are several good fund companies out there that have no sales charges. Fees
reduce overall investment returns.

B. Management Abuses
Churning, turnover, and window dressing may happen if your manager is abusing their
authority. This includes unnecessary trading, excessive replacement, and selling the losers prior to
quarter-end to fix the books.

C. Tax Inefficiency
Like it or not, investors do not have a choice when it comes to capital gains payouts in mutual
funds. Due to the turnover, redemptions, gains, and losses in security holdings throughout the
year, investors typically receive distributions from the fund that are an uncontrollable tax event.

D. Poor Trade Execution

If you place your mutual fund trade anytime before the cut-off time for same-day NAV, you'll
receive the same closing price NAV for your buy or sell on the mutual fund.2 For investors
looking for faster execution times, maybe because of short investment horizons, day trading, or
timing the market, mutual funds provide a weak execution strategy.

3. Index funds:
An index fund is a mutual fund or ETF that attempts to "track" or achieve the same return as a
particular market index. The S&P 500 Composite Stock Price Index, Russell 2000 Index, and
Wilshire 5000 Total Market Index are a few major indexes. The fund fulfills its objective to track
an index primarily by buying the securities (stocks and bonds, for example) of the companies
that make up the index.

As such, index funds provide investors the opportunity to invest indirectly in an entire market
without having to invest in the stock of the individual companies that it includes.

A market index measures the performance of a group of securities that represents a certain
economic market or sector. But you can't invest directly in a market index. If you want to
achieve returns that approximate those of the index, an index fund is a practical option. When
you buy shares of an index fund, either through a discount brokerage or an investment firm, you
indirectly invest in the securities that they directly invest in.

These funds buy into all or a representative sampling of the companies included in the index to
score similar returns.

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Because the funds' managers aren't actively picking securities to include in their portfolios but
are instead buying only those found in the benchmark they're following, index funds are said to be
passively managed investments.

Many stock indexes use market capitalization to weight the securities, which means those
companies whose shares have a higher market cap or total value are more strongly represented in
the index. The main trick for index fund managers is to match the stocks' weightings in the fund
with the weightings in the index.

Index funds may take different approaches to track a market index: some invest in all of the
securities included in a market index, while others invest in only a sample of the securities
included in a market index.

Market indexes often use a company’s market capitalization to decide how much weight that
security will have in the index. Market capitalization (or “market cap”) is a measure of the total
value of the company’s shares. The total value is equal to the share price times the number of
shares outstanding. In a market-cap-weighted index, securities with a higher market
capitalization value account for a greater share of the overall value of the index. Some market
indexes, such as the Dow Jones Industrial Average, are “price-weighted.” In this case, the price
per share will determine the weight of a security.

Some index funds may also use derivatives (like options or futures) to help achieve their
investment objective.

How do index funds invest?

Index funds have generally followed a passive, rather than active, style of investing. This means
they aim to maximize returns over the long run by not buying and selling securities very often. In
contrast, an actively managed fund often seeks to outperform a market (usually measured by
some kind of index) by doing more frequent purchases and sales

What are the costs associated with index funds?

Because index funds generally use a passive investing strategy, they may be able to save costs.
For example, managers of an index fund are not actively picking securities, so they do not need
the services of research analysts and others that help pick securities. This reduction in the cost of
fund management could mean lower overall costs to shareholders. However, keep in mind that
not all index funds have lower costs than actively managed funds. Always be sure you
understand the actual cost of any fund before investing.

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What are some risks of index funds?

Like any investment, index funds involve risk. An index fund will be subject to the same general
risks as the securities in the index it tracks. The fund may also be subject to certain other risks,
such as:

 Lack of Flexibility. An index fund may have less flexibility than a non-index fund to
react to price declines in the securities in the index.
 Tracking Error. An index fund may not perfectly track its index. For example, a fund
may only invest in a sampling of the securities in the market index, in which case the
fund’s performance may be less likely to match the index.
 Underperformance. An index fund may underperform its index because of fees and
expenses, trading costs, and tracking error.

Before You Invest

Before investing in any fund, you should carefully read all of the fund’s available information.
This includes the fund’s prospectus and most recent shareholder report. In addition, funds
disclose their portfolio holdings quarterly in Form N-Q and shareholder reports. You can
typically get this information from the fund’s website or your financial professional, as well as on
EDGAR.

Asking the following questions might help:

1. What fees and expenses can I expect to pay for buying, owning, and selling this fund?
2. What specific risks are associated with this fund?
3. How is the makeup of the fund’s index determined?
4. How does the fund’s investment strategy fit with my investment goals?

Advantages

A. The index funds promise good returns over a longer time horizon since the Nifty and the
Sensex have performed very well over time. The Sensex has a base value of 100 in 1979 and
over the last 39 years it has given 35-fold returns. The Nifty has its base in the year 1995 and has
given 11-fold returns over the last 23 years. What it means is that even if you had invested in an
index fund, you would have still made good returns over the last many years.

B. Index funds overcome the bias of human discretion. That is the big problem with most
diversified equity funds. There is a very strong element of discretion that is given to the fund
manager. Thus the fund manager’s conditioning, biases and past experiences make a difference

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to the investment strategy of the fund. The index fund, being a passive fund, overcomes the bias
and just tries to track the index.

C. Costs in an index fund are substantially lower. In fact, in the previous annual general meeting
of Berkshire Hathaway, Warren Buffett had lauded the efforts of John Bogle, the founder of
Vanguard Funds. It may be recollected that Vanguard is one of the world’s largest asset
managers with over $4.30 trillion in AUM. Buffett pointed out that Vanguard had saved billions
of dollars in costs to mutual fund investors by adopting an index based strategy.

D. Many diversified funds in India today are largely a reflection of index funds as a major
proportion of their portfolio is invested in index heavyweights. Therefore, you end up paying a
higher Total Expense Ratio (TER) for marginal return benefits. Index funds help you to
overcome this challenge.

E. Index funds have not taken off in a big way in India. That is more because more than 70-75%
of the fund managers actually beat the index in India while in the US it is just about 10-15%.
Once the index methodology becomes tighter and information flow more efficient, the returns
between active funds and passive funds will reduce to a much lower spread.

Disadvantages:
A. Fund manager discretion works better in case of active funds when asset allocation decisions
have to be taken. For example, if the equity fund manager finds the market to be too volatile,
then the cash allocation can be increased substantially. However, an index fund does not have
that flexibility as it has to be fully invested in the index at all points of time.

B. While index funds are free from the fund manager bias, they are still vulnerable to the risk of
tracking error. It is the extent to which the index fund does not track the index. Tracking error
may occur in an index fund due to liquidity provisions, index constituent changes, corporate
actions etc. This is a major risk in index funds.

C. Index funds do lose out on the expertise of the fund manager and the structured investment
approach that an active fund manager brings. At least in a country like India, where are there are
enough alpha opportunities index funds are likely to underperform the actively managed funds.

D. An investor needs to remember that index funds have not been great performers in the past.
However, it is surely an idea which may become a lot more attractive in the coming years.

4. Exchange-traded funds:
Exchange-traded funds are baskets of securities with multiple assets like stocks, bonds, and gold,
which make them similar to mutual funds, especially index funds. However, unlike mutual
funds, ETFs trade like stocks, meaning that investors can buy and sell shares on an exchange.
ETFs' versatility makes them good tools for investing either in broad market indices like the S&P
500 or in sectors, such as technology or health, and sub-sectors, such as social media or robotics.

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Buying and selling ETFs can be as easy as buying a stock; you can do it through regular
brokerage accounts during normal trading hours. When you place an ETF trade, you'll have to
choose a certain number of shares to buy or sell, just like you would with a stock.

While ETFs trade on an exchange like stocks, they have a unique process of share creation and
redemption. A third party, known as authorized participants (APs), handles the buying and
selling of the ETF's underlying securities, generally in large chunks of shares known as creation
units. That way, the ETF doesn't absorb those trading costs, and the price of the fund stays
closely tied to that of the underlying index, regardless of supply and demand.

An ETF is called an exchange traded fund because it's traded on an exchange just like stocks
are. The price of an ETF’s shares will change throughout the trading day as the shares are
bought and sold on the market. This is unlike mutual funds, which are not traded on an
exchange, and trade only once per day after the markets close. Additionally, ETFs tend to be
more cost-effective and more liquid when compared to mutual funds.

KEY TAKEWAYS

 An exchange traded fund (ETF) is a basket of securities that trade on an exchange just
like a stock does.
 ETF share prices fluctuate all day as the ETF is bought and sold; this is different from
mutual funds that only trade once a day after the market closes.1
 ETFs can contain all types of investments including stocks, commodities, or bonds;
some offer U.S.-only holdings, while others are international.
 ETFs offer low expense ratios and fewer broker commissions than buying the stocks
individually does.
Types of ETFs
There are various types of ETFs available to investors that can be used for income generation,
speculation, price increases, and to hedge or partly offset risk in an investor's portfolio. Here is a
brief description of some of the ETFs available on the market today.

 Bond ETFs

Bond ETFs are used to provide regular income to investors. Their income distribution depends on
the performance of underlying bonds. They might include government bonds, corporate
bonds, and state and local bonds—called municipal bonds. Unlike their underlying instruments,
bond ETFs do not have a maturity date. They generally trade at a premium or discount from the
actual bond price.

 Stock ETFs

Stock ETFs comprise a basket of stocks to track a single industry or sector. For example, a
stock ETF might track automotive or foreign stocks. The aim is to provide diversified exposure to
a single industry, one that includes high performers and new entrants with potential for

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growth. Unlike stock mutual funds, stock ETFs have lower fees and do not involve actual
ownership of securities.

 Industry ETFs

Industry or sector ETFs are funds that focus on a specific sector or industry. For example, an
energy sector ETF will include companies operating in that sector. The idea behind industry
ETFs is to gain exposure to the upside of that industry by tracking the performance of
companies operating in that sector. One example is the technology sector, which has witnessed an
influx of funds in recent years. At the same time, the downside of volatile stock performance is
also curtailed in an ETF because they do not involve direct ownership of securities. Industry ETFs
are also used to rotate in and out of sectors during economic cycles.

 Commodity ETFs

As their name indicates, commodity ETFs invest in commodities, including crude oil or
gold. Commodity ETFs provide several benefits. First, they diversify a portfolio, making it
easier to hedge downturns. For example, commodity ETFs can provide a cushion during a
slump in the stock market. Second, holding shares in a commodity ETF is cheaper than physical
possession of the commodity. This is because the former does not involve insurance and storage
costs.

 Currency ETFs

Currency ETFs are pooled investment vehicles that track the performance of currency pairs,
consisting of domestic and foreign currencies. Currency ETFs serve multiple purposes. They
can be used to speculate on the prices of currencies based on political and economic
developments for a country. They are also used to diversify a portfolio or as a hedge against
volatility in forex markets by importers and exporters. Some of them are also used to hedge
against the threat of inflation. There's even an ETF option for Bitcoin.

 Inverse ETFs

Inverse ETFs attempt to earn gains from stock declines by shorting stocks. Shorting is selling a
stock, expecting a decline in value, and repurchasing it at a lower price. An inverse ETF uses
derivatives to short a stock. Essentially, they are bets that the market will decline. When the
market declines, an inverse ETF increases by a proportionate amount. Investors should be aware
that many inverse ETFs are exchange traded notes (ETNs) and not true ETFs. An ETN is a bond
but trades like a stock and is backed by an issuer like a bank. Be sure to check with your broker to
determine if an ETN is a good fit for your portfolio.

In the U.S., most ETFs are set up as open-ended funds and are subject to the Investment
Company Act of 1940 except where subsequent rules have modified their regulatory
requirements. Open-end funds do not limit the number of investors involved in the product.

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How to Begin Investing in ETFs?
With a multiplicity of platforms available to traders, investing in ETFs has become fairly easy.
Follow the steps outlined below to begin investing in ETFs.

1. Find an investing platform: ETFs are available on most online investing platforms,
retirement account provider sites, and investing apps like Robinhood. Most of these
platforms offer commission-free trading, meaning you don't have to pay fees to the
platform providers to buy or sell ETFs. However, a commission-free purchase or sale
does not mean that the ETF provider will also provide access to their product without
associated costs. Some areas in which platform services can distinguish their services
from others are convenience, services, and product variety. For example, smartphone
investing apps enable ETF share purchase at the click of a button. This may not be the
case for all brokerages, which may ask investors for paperwork or a more complicated
situation. Some well-known brokerages, however, offer extensive educational content
that helps new investors become familiar with and research ETFs.

2. Research ETFs: The second and most important step in ETF investing involves
researching them. There is a wide variety of ETFs available in the markets today. One
thing to remember during the research process is that ETFs are unlike individual
securities like stocks or bonds. You will need to consider the whole picture—in terms of
sector or industry—when you commit to an ETF. Here are some questions you might
want to consider during the research process:

What is your time frame for investing?

Are you investing for income or growth?

Are there particular sectors or financial instruments that excite you?

3. Consider a trading strategy: If you are a beginning investor in ETFs, dollar-cost

averaging or spreading out your investment costs over a period of time is a good trading
strategy. This is because it smoothes out returns over a period of time and ensures a
disciplined (as opposed to a haphazard or volatile) approach to investing. It also helps
beginning investors learn more about the nuances of ETF investing. When they become
more comfortable with trading, investors can move out to more sophisticated strategies
like swing trading and sector rotation.

Advantages:

A. Unlike traditional stocks, the Exchange Traded Funds can be traded throughout the day. They
provide an opportunity for speculative investors to bet on the direction of shorter term market
movements.

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B. Exchange Traded Funds shine when it comes to saving money. They offer all the benefits of
the index stock and cost a lot less.

C. Exchange Traded Funds come in handy when investors want to create a diversified portfolio.

D. Exchange Traded Funds are a favorite amongst the tax aware investors. The unique structure
of Exchange Traded Funds allows the investors who are trading in large volumes to receive in-
kind redemptions.

Disadvantages:

A. Brokerage fees and Demat account

Since ETFs are traded like shares, there are several expenses which have to be incurred to
purchase them. This is generally done by the fund managers, who charge a nominal commission
fee for such transactions.
You can also opt to transact by yourself on the share market and not involve any fund managers in
the process. A Demat account has to be opened in such a situation. Operating a Demat account
requires basic knowledge of stock market transactions and its associated technique, which might
be difficult for a novice.

B. The volatility of the stock market

ETF companies listed on a stock exchange are subject to price fluctuations as per market trends.
They are not stable like government bonds. Earning a profit or incurring a loss depends heavily on
the stock market conditions.

C. Diversification
Exchange traded funds have moderate diversity. As most ETFs are passively managed, they
generally invest in best-performing companies listed on a particular stock exchange. ETF
organizations often overlook small scale companies with huge potential.

5. Private equity funds:

Private equity is private ownership, as opposed to stock ownership, of a company. Private equity
investors can buy all or part of a private or public company, and they usually have a 5 to 10-year
time horizon for which they want to keep their investment before selling. Private equity firms
typically look for about a $2.50 return for every dollar invested.

Since private equity investments have a longer time horizon than typical stock investors, private
equity can be used to fund new technologies, make acquisitions, or strengthen a balance sheet
and provide more working capital. Private equity investors hope to beat the market in the long
run by selling their ownership at a great profit either through an initial public offering or to a
large public company.

If all of a public company is bought, it results in a delisting of that company on the stock
exchange. This is called "taking a company private." It's usually done to rescue a company

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whose stock prices are falling, giving it time to try growth strategies that the stock market may not
like. That's because private equity investors are willing to wait longer to obtain a higher
return, while stock market investors generally want a return that quarter if not sooner.

The money raised by private equity firms is put into private equity funds. These funds are
usually structured as limited partnerships, with duration of 10 years. The funds typically have
annual extensions, and the money comes mainly from institutional investors, like pension funds,
sovereign wealth funds, and corporate cash managers, as well as family trust funds and even
wealthy individuals. It can include cash and loans, but not stocks or bonds.

A private equity firm typically manages several distinctly different funds, and will attempt to
raise money for a new fund every three to five years, as the money from the previous fund is
invested.

Private equity firms use the cash from their investors to purchase whole or partial interests in
companies. The return on those investments, called the internal rate of return, attracts new
investors and defines the success of the firm.
But private equity firms have found a way to artificially boost that IRR. Since interest rates are so
low, they borrow funds to make a new investment. After holding the investment for a while, they
use investors' cash to pay off the loan and take ownership of the asset when it looks like the
investment is about to pay back. As a result, it looks like the investors received a huge return in a
short period. The IRR looks much better, thanks to the use of borrowed funds.

How Does Private Equity Work?

Private equity firms raise money from institutional investors and accredited investors for funds
that invest in different types of assets. The most popular types of private equity funding are
listed below.

 Distressed funding: Also known as vulture financing, money in this type of funding is
invested in troubled companies with underperforming business units or assets. The
intention is to turn them around by making necessary changes to their management or
operations or make a sale of their assets for a profit. Assets in the latter case can range
from physical machinery and real estate to intellectual property, such as patents.
Companies that have filed under Chapter 11 bankruptcy in the United States are often
candidates for this type of financing. There was an increase in distressed funding by
private equity firms after the 2008 financial crisis.

 Leveraged Buyouts: This is the most popular form of private equity funding and
involves buying out a company completely with the intention of improving its business
and financial health and reselling it for a profit to an interested party or conducting an
IPO. Up until 2004, sale of non-core business units of publicly listed companies
comprised the largest category of leveraged buyouts for private equity. The leveraged
buyout process works as follows. A private equity firm identifies a potential target and
creates a special purpose vehicle (SPV) for funding the takeover. Typically, firms use a
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 combination of debt and equity to finance the transaction. Debt financing
may account for as much as 90 percent of the overall funds and is transferred to the
acquired company’s balance sheet for tax benefits. Private equity firms employ a variety
of strategies, from slashing employee count to replacing entire management teams, to
turn around a company.

 Real Estate Private Equity: There was a surge in this type of funding after the 2008
financial crisis crashed real estate prices. Typical areas where funds are deployed are
commercial real estate and real estate investment trusts (REIT). Real estate funds require
higher minimum capital for investment as compared to other funding categories in
private equity. Investor funds are also locked away for several years at a time in this
type of funding. According to research firm Preqin, real estate funds in private equity are
expected to clock in a 50 percent growth by 2023 to reach a market size of $1.2 trillion.3

 Fund of funds: As the name denotes, this type of funding primarily focuses on investing
in other funds, primarily mutual funds and hedge funds. They offer a backdoor entry to an
investor who cannot afford minimum capital requirements in such funds. But critics of
such funds point to their higher management fees (because they are rolled up from
multiple funds) and the fact that unfettered diversification may not always result in an
optimal strategy to multiply returns.

 Venture Capital: Venture capital funding is a form of private equity, in which investors
(also known as angels) provide capital to entrepreneurs. Depending on the stage at
which it is provided, venture capital can take several forms. Seed financing refers to the
capital provided by an investor to scale an idea from a prototype to a product or service.
On the other hand, early stage financing can help an entrepreneur grow a company
further while a Series A financing enables them to actively compete in a market or create
one.

Advantages:
A. Adds working capital to the business: Raising money for a company or startup isn’t easy, but
private equity firms can provide the cash infusion necessary to support a new or struggling
business.

B. Avoids conventional financing methods: Private equity valuations are not affected by the
public market. A company that receives funding from private investments won’t have to go
through a bank and risk high-interest loans to support themselves financially.

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C. Allows more freedom for growth: Companies who receive investments from institutions
like venture capital firms may do so at an earlier stage of their development, allowing them to try
different growth strategies to help form their business.

Disadvantages:
A. Requires upfront funding: As an investor, you’ll likely need access to a substantial amount
of capital to invest in a private equity firm. Whether you aim to help turn a company around or
keep it afloat, it can be costly to turn a profit (which can take years to happen).

B. It can be a lengthy process: It can take a while for a company to get on the radar of a
private equity firm. Established companies and startups are responsible for convincing investors
why they should put their money into their business, leading to months of deliberation or
negotiations that may not ever materialize.

C. Less control for investors: When an investment firm infuses a business with capital, it may be
able to make decisions regarding the management or structure of the business. For people who
have built their own company from the ground up, handing over shares and relinquishing part of
their control can be a difficult part of private equity.

1.9 Benefits to Asset Management Companies

______________________________________________________________________________

There are various benefits to pooling capital together, including:

1. Economies of scale
Economies of scale are the cost advantages that a company can gain from increasing the scale of
operations. With larger operations, the per-unit costs of operating are lower.
For example, asset management companies can purchase securities in larger quantities and can
negotiate more favorable trading commission prices. Also, they can invest a lot of capital in a
single office, which reduces overhead costs Overheads are business costs that are related to the
day-to-day running of the business. Unlike operating expenses, overheads cannot be.

2. Access to broad asset classes

Access to broad asset classes means that asset management companies can invest in asset classes
that an individual investor will not be able to. For example, an AMC can invest in multi-billion-
dollar infrastructure projects, such as a power plant or a bridge. The investments are so large that
an individual investor will not usually be able to access them.

3. Specialized expertise
Specialized expertise refers to asset management companies hiring finance professionals with
extensive experience in managing investments that most individual investors lack. For example,

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an AMC can hire various professionals who specialize in certain asset classes, such as real estate,
fixed income, sector-specific equities, etc.

Downsides to Asset Management Companies

Asset management companies come with a few downsides as well, such as:
1. Management fees
Most asset managers charge flat fees that are collected no matter what their performance was. As
a result, over time, the fees can become very expensive for investors. Because of the costs for the
resources and expertise required to run an AMC, the fees are high to compensate for such costs
and to provide asset managers with a profit as well.

2. Inflexible
Asset managers can become too large to a point where they are cumbersome and unresponsive to
the dynamic market. Managing too large of an amount of capital creates operational problems at
times.

3. Risk of underperforming
Typically, the performance of AMCs is evaluated in comparison to a benchmark. A benchmark is
a standard to compare performance against, usually in the form of a broad market index. There is
the risk that asset managers underperform the markets, and if including the management fees
mentioned earlier, it can become very costly for investors.

1.10 Asset under Management

______________________________________________________________________________

1.10.1 What Are Assets Under Management (AUM)?

An asset under management (AUM) is the total market value of the investments that a person or
entity manages on behalf of clients. Assets under management definitions and formulas vary by
company.
In the calculation of AUM, some financial institutions include bank deposits, mutual funds, and
cash in their calculations. Others limit it to funds under discretionary management, where the
investor assigns authority to the company to trade on their behalf.
Overall, AUM is only one aspect used in evaluating a company or investment. It is also usually
considered in conjunction with management performance and management experience.
However, investors often consider higher investment inflows and higher AUM comparisons as a
positive indicator of quality and management experience. AMCs manage a very significant
amount of money. However, the total Assets under Management (AUM) can vary greatly in case
of different AMCs.

1.10.2 How important is AUM for investing?

A mutual fund with a hefty AUM indicates a large client base, meaning that the trust factor of
the fund is high. AUM can be used as a measure of liquidity. A higher AUM can provide a
cushion in case there is a big redemption. This is especially true for overnight and liquid

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funds that are sensitive to large redemptions by institutional investors. Having a higher AUM for
such funds means a better ability to absorb shock offloading.

One factor to keep in mind is that size is relative. Small or large depends on what you are
comparing it against. Rather than looking at the absolute value of assets that a mutual fund is
managing, compare the figure with its other peers to ascertain how the fund is doing.

Additionally, a large AUM does not automatically guarantee better performance. Although it is
worth taking into account, a fund’s AUM should not be the only factor that affects your
investment decision. Just because other people in the market have trusted a fund house with their
money does not mean that you should too. Consider AUM in conjunction with other indicators
like a fund’s historical performance vis-à-vis peers in different market cycles, expense ratio, risk
ratios, fund house’s pedigree, the reputation of the fund manager, risk-management strategies,
compliance, among others.

1.10.3 How does a high AUM impact a mutual fund performance?

A fund house’s AUM usually has no direct bearing on its performance. A large AUM cannot
impact returns. The performance of a mutual fund depends on the fund manager and their
investment abilities.

1.10.4 How is AUM calculated?

The value of assets that a fund manages is never fixed. It changes depending on the number of
investors who pump in money and the returns the fund generates.
Positive returns increase the overall investment and can also attract new investments, which in
turn pushes up the AUM. Negative returns will have the opposite impact. Redemption of units
will also impact the AUM.

1.10.5 How does AUM impact the fund fee?

AUM is most crucial when it comes to calculating the management fee. All fund houses charge a
fee, called the expense ratio, in proportion to the fund size. The expense ratio covers
management and operational costs. The Securities and Exchange Board of India has clearly
demarcated the upper limit of expense ratios for mutual funds, based on AUMs.
Since it is calculated as a percentage of AUM, a larger AUM means higher fees for the fund
house while a smaller AUM means the opposite.

For equity mutual funds, SEBI permits a maximum total expense ratio of 2.5% for the first
Rs.100 crore of average weekly AUMs, 2.25% for the subsequent Rs.300 crores, and 1.75% for
all AUMs beyond that. For debt mutual funds, the TER permitted is 0.25% lower than for equity
funds

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 CHAPTER 2: RESEARCH METHODOLOGY

2.1 Objectives of study:

1. To study the competition faced by AMC Industries.

2. To analyze the strategy followed by AMC Industries.
3. To know the Contribution of Asset management companies (AMCs) in Indian Financial
Markets.
4. To understand the economic performance of asset management companies operating in
India.
5. Problems faced by Regulators.
6. To enhance knowledge about the subject.
7. To comprehend the impact of global economic crisis on Indian AMCs industry.
8. To understand the sustainability of asset management companies in India.

2.2 Scope of study:

The scope of study was limited to Mumbai

2.3 Statement of problem:

A study on Contribution of Asset management companies (AMCs) in Indian Financial Markets.

2.4 Nature of study/type of research:

This is a descriptive type of research where SWOT Analysis: To understand the Strengths,
Weakness, Social, Opportunities and Threats of Indian mutual fund industry.

2.5 Time dimension:

The research was a cross-sectional base due to time limitations which allowed take a snapshot of
aspects at a single point of time. The whole research was completed in a month’s time. Mostly in
my research I had to face Covid -19 related restriction.

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2.6 Data collection method:

 Secondary Data:
Secondary data was collected through various websites and articles on internet.

2.7 Limitations:

There were certain limitations of this study that are enlisted below:

 Time of submission, due to academic schedule the researcher had the limited time frame
of a week to complete this research.

 Due to various technical constraints only three major asset management companies have
been studied, i.e. Birla Sunlife Asset Management Company Limited; HDFC Asset
Management Company Limited and UTI Asset Management Limited.

 Since the study is based solely on secondary data so analysis may not fully reflect the
economic performance of the asset management companies considered for the study

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 Chapter 3: Literature reviews
The asset management industry refers to professional fund management industry. Whenever
individual or retail investors pool together their resources and allow a professional fund manager
to invest it, the exercise can be considered to be part of this industry. It does not need to
necessarily involving pooling of funds, professional management of the assets of high net worth
individuals (HNI) may also be considered part of this industry. In general there are a few broad
kinds of pooled investment structures. The most common and the most visible are the mutual
funds. These are typically open-ended funds from whom individual investors can buy shares or
redeem them and their investment in aggregated and channelled into the equity or debt markets or
a combination thereof depending upon the mandate of the fund in question. In India, the asset
management industry is broadly made up of a vibrant mutual fund sector and a growing pension
fund sector. Though started way back in 1960s, the Indian mutual fund industry has grown in
both the size of assets under management and the number of funds after the foray of the private
players in the 90s. The ensuing paragraphs focus upon the genesis and growth of mutual funds in
India.

Globally digitization has gained significance as a key building block for businesses and
governments. Especially for the service sector it is considered as a great boon. Digitization has
caused unravelling of a new paradigm in which businesses are catering to their stakeholders in
novel and cost effective ways. It is expected that digitization shall help businesses enter newer
realms of operating efficiency and associated profitability.

The mutual fund sector in India is a promising case of digitization in the financial service sector.
The prominent stakeholders in a mutual business are the Asset Management Company (AMC),
Investors (retail as well as institutional), Financial Advisors (individuals as well as national level
distributors), Registrar & Transfer Agents (RTAs) and Banks. These stakeholders play an
integral role in the smooth functioning of the mutual fund business.

This paper evaluates the impact of digitization on the inter-relationships and functioning of the
said stakeholders towards realization of respective purposes. For instance, the Financial Advisors
have the objective of communicating with their customers such that there is easy flow of
information regarding valuations, purchase and sell decisions and consequent execution of the
agreed decision Similarly, AMCs need to be in contact with their distributors and investors to
communicate about the new developments and investment related decisions and executions of
the same. The research question that this study seeks to answer is whether digitization has
contributed to more business in terms of AUM, number of IFAs, number of new customers,
number of foreign country based customers (Indian Nationals). At the second level, this paper
shall answer whether digitization has improved convenience of dealing in mutual funds and also
the engagement levels of stakeholders.

The results will be based on secondary as well as primary data using structured questionnaire and
focus interviews. Statistical tools like paired t-test, chi-square test, correlation analysis and
descriptive statistics shall be used.

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 CHAPTER 4: DATA ANALYSIS, PRESENTATION AND
INTERPRETATION

Top 10 Asset Management Companies In India

1. ICICI Prudential Asset Management Company Ltd

The AMC is a joint venture between ICICI Bank of India one of the leading banks in India and
Prudential Plc of UK. While Prudential Plc. is one of the largest players in the financial services
sector of the UK. Set up on October 13, 1993, and headquartered in Mumbai, this AMC has an
asset base of around Rs 2, 93,338 crore and offers over 1400+ funds. The AMC has very well
diversified service offerings and has excellent ratings. The majority of the plans offered are
affordable to retail investors. ICICI Prudential AMC also prides providing superior risk
management in mutual fund investments.

The Company manages significant Portfolio Management Services for its clients across the
globe in asset classes like Debt, Real Estate, Equity. The company is an ideal mix of resource
bandwidth, process orientation, and investment expertise.
The company has current strength of more than 150 branch lo cations and over 10000
employees. The AMC has forged a position of preeminence in the Indian Mutual Fund
industry as the third -largest asset management company in the country.
The company also provides SIP Calculator, Asset Allocation Tool, Returns
calculator, mutual fund calculator, mutual fund NAV, investment news, investment services,
investment portfolio, variety of mutual funds and more on the website to invest online.

ICICI Equity Funds

 MidCap Fund
 Target Returns Fund
 Dynamic Plan
 Discovery Fund
 Focused Bluechip Equity Fund
 Infrastructure Fund
 ICICI Prudential Tax Plan
 Banking and Financial Services Fund
 US Bluechip Equity Fund

ICICI Debt Funds

 Multiple Yield Fund (MYF)
 Flexible Income Plan
 Capital Protection Oriented Fund
 Regular Savings Fund
 Fixed Maturity Plan (FMP)

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  Dynamic Bond Fund
 Income Opportunities Fund
 ICICI Prudential Corporate Bond Fund

ICICI Balance/Hybrid Funds

 Monthly Income Plan
 Child Care Plan(Study)
 Balanced Fund

ICICI Exchange Traded Funds

 Gold Exchange Traded Fund
 ICICI Prudential SPICE Fund

Here you can find business information of the company such as a business address, products &
services, contact Nos., and nature of the business, etc.. At Suger Mint, the company listed in the
Investment & Finance Business category.

ICICI Prudential Life Insurance Company Limited (ICICI Prudential Life) is promoted by ICICI
Bank Limited and Prudential Corporation Holdings Limited.
ICICI Prudential Life began its operations in the fiscal year 2001. On a retail weighted received
premium basis (RWRP), it has consistently been amongst the top companies in the Indian life
insurance sector. Our Assets Under Management (AUM) at 31st December 2021 were `2,375.60
billion.

At ICICI Prudential Life, we operate on the core philosophy of customer-centricity. We offer

long-term savings and protection products to meet the different life stage requirements of our
customers. We have developed and implemented various initiatives to provide cost-effective
products, superior quality services, consistent fund performance and a hassle-free claim
settlement experience to our customers.

In FY 2015 ICICI Prudential Life became the first private life insurer to attain assets under
management of `1 trillion. ICICI Prudential Life is also the first insurance company in India to be
listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

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Year Particulars

FY2001 Our company started operations

FY2002 Crossed the mark of 100,000 policies

FY2005 Crossed the mark of 1 million

policies

Crossed the mark of 5 million

policies
Crossed receipt of `100 billion of the
FY2008 total premium
Crossed `250 billion of assets under
management

Established subsidiary to undertake

pension funds related business
Our company turned profitable - a
FY2010 registered profit of `2.58 billion
Crossed `500 billion of assets under
management

FY2012 Started paying dividends

FY2015 Crossed `1 trillion of assets under

management

FY2017 First insurance company in India to

list on NSE and BSE

FY2021 Crossed `2 trillion of assets under

management

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Vision: The purpose of our existence
To build an enduring institution that serves the protection and long-term saving needs of
customers with sensitivity.

Values: The way we do things

Our core values are Customer First, Humility, Passion, Integrity, and Boundary lessness. Values
guide our actions and define the way we work. We encourage all our colleagues to exemplify
and role model the Values.
 Customer First: Keep customers at the center of everything we do
 Humility: Be open to learn and change
 Passion: Demonstrate infectious energy to win and excel
 Integrity: Do the right thing
 Boundarylessness: Treat organisation agenda as paramount

Products & Services

The AMC manages significant Assets under Management (AUM) in the Mutual Fund segment
across asset classes. The AMC also caters to Portfolio Management Services and Real Estate
Division for investors, spread across the country, along with International Advisory Mandates for
clients across international markets.

Mutual Fund
The Mutual Fund caters primarily to retail investors.
Portfolio Management Services
The Portfolio Management Services allows high net worth investors to invest in a more
concentrated portfolio aiming at higher returns. In the year 2000, ICICI Prudential AMC was the
first institutional participant to offer the service, and has now got a successful track record of
over 10 years.
Real Estate Business
The Real Estate division caters to high net worth investors and domestic institutional investors,
with ICICI Prudential AMC starting the Real Estate Investment Series Portfolio in the year 2007.

Management Team – Investments at ICICI Prudential Mutual Fund:

Mr. S. Naren
Executive Director & Chief Investment Officer:
Mr. Naren monitors the entire investment function across the Mutual Fund at ICICI Prudential

AMC and the International Advisory Business. He also directly handles the ICICI Prudential

Page | 54
 Dynamic Plan and the ICICI Prudential Top 100 Fund. He has a B. Tech degree from IIT

Chennai and an MBA in finance from IIM Kolkata.

Mr. Rahul Goswami

Chief Investment Officer– Fixed Income:
Rahul works as the CIO of Fixed Income. He has an overall work experience of more than 22

years. He currently manages 8 funds at ICICI Prudential.

o ICICI Prudential Liquid Plan

o ICICI Prudential Flexible Income Plan
o ICICI Prudential Floating Rate Fund
o ICICI Prudential Banking & PSU Debt Fund
o ICICI Prudential Medium Term Plan
o ICICI Prudential Gilt Fund (All Options)
o ICICI Prudential Multiple Yield Fund and
o ICICI Prudential Capital Protection Oriented Fund

Mr. Rahul Rai

Head of Real Estate Business:
At ICICI Prudential, Rahul is responsible for handling the Real Estate Business and driving team

synergies. He has an overall work experience of nearly 26 years. He is a Chartered Accountant

and has completed the Cost Accountancy and Intermediate level Company, Secretary Course.

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2. HDFC Mutual Fund

HDFC is one of India’s leading providers of financial services. HDFC AMC was launched in
1999 and is among the top AMCs in the country. The AMC made a notable name after the
acquisition of eight funds from the Zurich India Mutual Fund. HDFC Mutual Fund launched its
first product in the year 2000 and has been constantly evolving over the last decade and a half.
There are over 11 types of mutual fund schemes. The company has recently traded in IPO and
has soared a massive 65% in its debut. The overall Assets Under Management (AUM) are INR
3,06,840.72 Cr (as on June 30, 2018). These funds were then renamed to funds such as HDFC
Top 200 Fund, HDFC Equity Fund, etc.

The fund house offers nearly 900 funds across all categories. Some of the notable funds to its
credit are:
HDFC Balanced Fund
HDFC Top 100 Fund

As mentioned above, HDFC MF offers a wide range of mutual funds to cater to the needs of
investors. Majority of schemes by HDFC Mutual Fund have excellent CRISIL rating of three and
above. By investing in HDFC MF investors can avail tax benefits as well. Schemes by HDFC
Mutual Fund are managed by highly experienced industry experts to manage the overall risk.

Fund managers at HDFC Mutual Fund:

Mr. Prashant Jain

Executive Director & Chief Investment Officer

Over 20 years of experience in fund management and research in the mutual fund industry.

Mr. Shobhit Mehrotra

Senior Fund Manager and Head of Credit

He has over 18 years of experience in Fixed Income markets, credit rating etc

Mr. Vinay R. Kulkarni

Senior Fund Manager

Collectively over 22 years of experience, of which 20 years in Fund Management and Equity
Research and 2 years in the IT industry.

Mr. Anupam Joshi

Fund Manager in Fixed Income group
He has more than 10 years’ experience in fund management, research, and dealing.

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HDFC Asset Management (HDFC AMC) is the investment manager to HDFC Mutual Fund
(HDFC MF) the largest mutual fund in India with total AUM of Rs.343938 Crore as of March 31
2019. HDFC AMC has a diversified asset class mix across Equity and Fixed Income/Others. It
has a countrywide network of branches along with a diversified distribution network comprising
Banks Independent Financial Advisors and National Distributors. The Company is a subsidiary of
Housing Development Finance Corporation Limited. As on 31 March 2019 the company had
more than 75000 empanelled distribution partners serviced through a total of 210 branches. As at
March 31 2019 Housing Development Finance Corporation Ltd the holding company owned
52.77% of the Company's equity share capital.

The Company operates as a joint venture between Housing Development Finance Corporation
Limited ('HDFC') and Standard Life Investments Limited ('SLI'). HDFC is one of India's leading
housing finance companies. HDFC group has emerged as a recognized financial conglomerate in
India with presence in housing finance banking life and non-life insurance asset management
real estate funds and education finance. Listed companies of the HDFC group include HDFC
Limited HDFC Bank Limited HDFC Standard Life Insurance Company Limited and GRUH
Finance Limited which had market capitalizations of US$46.87 billion (Rs. 3209.38 billion)
US$80.19 billion (Rs. 5490.74 billion) US$13.41 billion (Rs. 918.01 billion) and US$3.25
billion (Rs. 222.47 billion) respectively as of June 30 2018. SLI is an indirect subsidiary of
Standard Life Aberdeen pic ('Standard Life Aberdeen') one of the world's largest investment
companies created in 2017 from the merger of Standard Life plc and Aberdeen Asset
Management PLC. SLI operates within the brand Aberdeen Standard Investments; with its
investment arm managing 575.7 billion (Rs. 49666.50 billion) of assets as of December 31 2017
making it one of the largest active managers in Europe. Standard Life Aberdeen is listed on the
London Stock Exchange and had a total market capitalization of 9.70 billion (Rs. 876.72 billion)
as of June 30 2018. The company offers a large suite of savings and investment products across
asset classes which provide income and wealth creation opportunities to customers. As of March
31 2019 the company offered 147 schemes that were classified into 22 equity-oriented schemes
115 debt schemes (including 72 fixed maturity plans ('FMPs')) 3 liquid schemes and 7 other
schemes (including exchange-traded schemes and funds of fund schemes).

This diversified product mix provides them with the flexibility to operate successfully across
various market cycles cater to a wide range of customers from individuals to institutions address
market fluctuations reduce concentration risk in a particular asset class and work with diverse
sets of distribution partners which helps to expand its reach. The Company also provides
portfolio management and segregated account services including discretionary non-discretionary
and advisory services to high net worth individuals ('HNIs') family offices domestic corporates
trusts provident funds and domestic and global institutions.HDFC Asset Management Company
Limited was incorporated as a public limited company on December 10 1999 and obtained its
certificate for commencement of business on March 9 2000 from the RoC. It was approved to act
as an Asset Management Company for HDFC Mutual Fund by SEBI on 3 July 2000. In

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September 2000 the company's Assets under Management (AUM) reached Rs 6.5 billion. In
August 2001 Standard Life Investments became a shareholder of the company.

In September 2002 the company's AUM crossed Rs 100 billion.In June 2003 HDFC Asset
Management Company acquired Zurich Asset Management Company Limited (ZAMC) having
an AUM of Rs 34 billion. In January 2009 the company's AUM crossed Rs 500 billion. In
October 2009 the company's AUM crossed Rs 1 trillion. In March 2011 HDFC Debt Fund for
Cancer Cure was launched. In March 2014 the company launched its second CSR oriented fund
viz. HDFC Debt Fund for Cancer Cure 2014. In June 2014 the company acquired Morgan
Stanley Mutual Fund schemes having an AUM of Rs 19 billion. In September 2014 the
company's AUM crossed Rs 1.5 trillion. In May 2016 the company's AUM crossed Rs 2 trillion.
In April 2017 the company's Equity AUM crossed Rs 1 trillion. In December 2017 the
company's AUM crossed Rs 3 trillion.

During the financial year the shareholders of the Company at their meeting held on January 16
2014 approved the buy-back of equity shares of the Company from the shareholders of the
Company through tender offer. The buy-back offer was completed within the time limits as
prescribed under the Companies Act 1956 and 141500 equity shares of the Company were
bought by the Company under the buy-back offer. The present paid-up capital post the buy-back
offer is Rs. 252408000/-.HDFC Asset Management Company' promoters viz. HDFC and
Standard Life Investments Limited offloaded a total of 2.54 crore shares through an initial public
offer (IPO) of during the period from 25 July 2018 to 27 July 2018. There was no fresh issue of
shares by the company. HDFC offloaded 85.92 lakh shares and Standard Life Investments
Limited offloaded 1.68 crore equity shares through the IPO. The IPO was priced at Rs 1100 per
share. The company's shares were listed on the bourses on 6 August 2018. The Board of
Directors recommended issue of Bonus shares in the ratio of 3:1 i.e. 3 new equity shares for
every one equity share held and sub-division of equity shares of Rs.10/- each into two equity
shares of Rs. 5/- each which was approved by the Shareholders at an extra-ordinary general
meeting held on February 6 2018.

Accordingly bonus shares were allotted to the members who held the equity shares on the
Record Date i.e. February 5 2018 by capitalization of balance in the free reserves amounting to
Rs. 78.96 crores. Further the equity shares of face value of Rs. 10/- each were sub-divided into
two equity shares of face value of Rs. 5/- each by way of corporate action to the shareholders
who held the shares on the Record Date i.e. February 13 2018.The Board of Directors at its
meeting held on March 8 2018 have accorded in-principle approval for issue of up to 1600000
equity shares of face value of Rs. 5/- each of the Company for cash consideration aggregating up
to Rs. 210 crores by way of a private placement in accordance with the provisions of Sections 23
42 and 62(1)(c) of the Companies Act 2013 read with Rule 13 of the Companies (Share Capital
and Debentures) Rules 2014. During the year 2018 the Board of Directors of the Company
approved taking steps to initiate the process for an Initial Public Offering (IPO) of the Company
by way of an offer for sale by Housing Development Finance Corporation Limited (HDFC Ltd)

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and Standard Life Investments Limited (SLI) in one or more tranches such that the post dilution
shareholding of HDFC Ltd is at 50.01% and SLI at 24.99%. This is subject to relevant regulatory
and other approvals as applicable. Accordingly the Company has filed Draft Red Herring
Prospectus with Securities and Exchange Board of India on March 15 2018. The Company is
presently awaiting/will require approvals from SEBI and other regulatory authorities.The
Company has successfully undertaken Investment and Advisory services mandates during the
financial year 2017-18 pursuant to approval received from Securities and Exchange Board of
India (SEBI) with respect to undertaking Investment and Advisory services under Regulation
24(b) of the SEBI (Mutual Fund) Regulations 1996.

As on March 31 2018 the aggregate asset under investment management/advisory services under
this was Rs5099 crore.During the year the Company has completed its Initial Public Offering
(IPO) through an offer for sale of equity shares. The equity shares of the Company were listed on
National Stock Exchange of India Limited and BSE Limited on August 06 2018.Pursuant to the
receipt of approval of the members at the Extra Ordinary General Meeting of the Company held
on April 18 2018 the Company issued and allotted 1433600 equity shares of the Company of
Rs.5/- each at an issue price of Rs.1050/- per equity share aggregating to Rs.1505280000/- by
way of a private placement in accordance with Sections 62(1)(c) 42 and other applicable
provisions if any of the Companies Act 2013 including the Rules framed thereunder. The funds
raised from the issuance of private placement were utilized for general corporate purposes
including enhancement of the systems infrastructure.HDFC Ultra Short Term Fund ('the open-
ended scheme') was launched in the month of September 2018. The investment objective of the
Scheme is to generate regular income through investments in Debt and Money Market
Instruments while maintaining McCauley duration of the portfolio between 3 months and 6
months.

The Scheme aims to generate income through investments in a range of debt and money market
instruments. The Scheme would endeavor to generate returns commensurate with low levels of
interest rate risk. The NFO of the Scheme mobilised assets to the tune of Rs.1161 Crore. As of
March 31 2019 HDFC MF offered 147 schemes across asset classes to meet the varying
investment needs of investors.

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2.Reliance Mutual Fund (Now Nippon India Mutual Fund)

Reliance Mutual Fund is one of the fastest developing mutual fund houses in India. The mutual fund is
sponsored by a joint venture of Nippon Life Insurance (Japan) and Reliance Capital (India). The company
has an impressive track record of consistent returns. Reliance Mutual Fund has a presence in more than
150 cities in India. The diverse array of offerings has something for everyone. The company has over 55
lakh active portfolios. There are over 200 schemes in place for customers to choose from. While Reliance
currently has less AUM as compared to ICICI and HDFC, the fund offers close 1100 funds and enjoys
decent popularity in India.

Some of the notable mutual fund schemes offered by Reliance Mutual Fund are:
 Reliance Small Cap Fund
 Reliance Liquid Fund

Reliance Mutual Fund was set up on June 30, 1995, and has its headquarters in Santacruz, Mumbai. The
AMC has been plying its trade in the market for over two decades and has massive experience in
identifying the basic needs of the investors. This experience in the market allows them to pick stocks and
funds that possess a good potential to generate returns for the investors. The company prides itself in
launching new and innovative schemes in the market and have a large bouquet of funds and schemes to
cater to the specific needs of the investors. The customer care support offered by the Reliance Mutual
Fund is quite robust and along with their strong pan-India network, they value their customers and are
open for communication at all times.

Here are some of the fund managers at Reliance Mutual Fund:

 Mr. Ashwani Kumar

Senior Fund Manager – Equity Investments:
Mr. Ashwani Kumar has 18 years of experience in the financial services industry. He has been a
Fund Manager since 2003.

 Mr. Sailesh Raj Bhan

Deputy CIO
Mr. Sailesh Raj Bhan has 19 years of experience in equity research and fund management.

 Mr. Samir Rachh

Fund Manager – Equity Investments:
Mr. Rachh has total experience of more than 25 years. He is a commerce graduate from Mumbai
University.

 Mr. Sanjay Parekh

Senior Fund Manager – Equity Investments
Aditya Birla Sun Life Mutual Fund manages over 18 years of experience in equity research and
fund management, 9 years in fund management and 8 years as an analyst across various sectors.

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Nippon India Mutual Funds (formerly Reliance Mutual Fund) is one of the leading asset
management companies in India. It manages assets across managed accounts, mutual funds,
pension funds, alternative investments, and offshore funds. Nippon India Mutual Fund’s (NIMF)
asset manager is Nippon Life India Asset Management Limited (NAM India). NAM India’s
promoters are Reliance Capital Limited and Nippon Life Insurance Company that hold 75.93% of
its total issued and paid-up equity share capital.

Reliance Capital Limited is one of India’s topmost RBI registered Non-Banking Finance
Company and has its business interests in asset management, life insurance, general insurance,
stockbroking and other activities in the financial sector.

Nippon India Mutual Fund is one of India’s top Asset Management Companies. Set up in June
1995 as Reliance Mutual Fund, it was a joint venture between India's Reliance Capital and
Japan's Nippon Life Insurance company. In October 2019, Reliance's stake was bought by
Nippon, and the fund house was renamed as Nippon India Mutual Fund.
Nippon Mutual Funds manage assets worth Rs.2,07,288 crores. Currently, the range of Nippon
mutual funds schemes includes 52 equity, 266 debt, and 40 balanced funds. The company is led
by its CEO Sundeep Sikka. Nippon Life India Asset Management Limited works as an
investment management firm. The Company provides services like portfolio management,
mutual fund investment, financial planning, and advisory services to individuals, institutions,
trusts, and private funds.

Nippon Life Insurance Company (NLI) is Japan’s one of the leading private life insurance
company that offers a wide range of financial/traditional insurance products. The asset
management operations in Asia are carried out by NLI, through its subsidiary Nissay Asset
Management Corporation (“Nissay”), which manages assets globally.

Reliance Nippon Life Asset Management Limited (RNAM) is one of the largest asset
management companies in India; managing (directly & indirectly) assets across mutual funds
pension funds managed accounts alternative investments and offshore funds. RNAM is the asset
manager of Reliance Mutual Fund (RMF) Schemes. RMF has a pan India presence across 298
locations and over 71100 empanelled distributors.

RNAM also has the mandates for fund management from Employees' Provident Fund
Organisation (EPFO) The Pension Fund Regulatory and Development Authority (PFRDA) [as a
Sponsor of the Pension Fund Manager] and The Coal Mines Provident Fund Organisation
(CMPFO). As of March 31 2018 the Company had three subsidiaries. Two of such subsidiaries
are overseas being one each in Singapore and Mauritius and one subsidiary being in India. All
the subsidiaries of the Company are engaged in financial services and related activities.RNAM
acts as an advisor for India focused Equity and Fixed Income funds [in Japan (launched by
Nissay Asset Management) Korea (launched by Samsung Asset Management) and in Thailand
(launched by BBL Asset Management)].

RNAM also manages offshore funds through its subsidiaries in Singapore and Mauritius and has
representative office in Dubai thereby catering to investors across Asia Middle East UK US and
Europe.Reliance Nippon Life is promoted by Reliance Capital Limited an RBI registered non-

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banking finance company (NBFC) with business interests including in asset management and
mutual funds life health and general insurance commercial and home finance stock broking
wealth management services distribution of financial products asset reconstruction and
proprietary investments. Reliance Capital Limited is a part of Reliance Group which has business
interests in financial services telecommunications power energy infrastructure and defense. The
Reliance Group is led by Mr. Anil D. Ambani one of India's prominent business leaders. The
Company's co-promoter Nippon Life Insurance Company ('Nippon Life') is one of the leading
private life insurers in Japan.

Nippon Life offers a wide range of financial products including individual and group life and
annuity policies.Reliance Nippon Life Asset Management Limited was originally incorporated as
a public limited company with the name Reliance Capital Asset Management Limited' on
February 24 1995 at Ahmedabad. Subsequently in accordance with the terms of the Second
Amended & Restated Shareholders' Agreement dated October 13 2015 executed amongst the
Company Reliance Capital and Nippon Life the name of the Company was changed to Reliance
Nippon Life Asset Management Limited' on May 5 2016.

The company started mutual fund operations in 1995 as the asset manager for Reliance Mutual
Fund. During the year under review Reliance Mutual Fund launched two schemes Reliance
Growth Fund and Reliance Vision Fund.In 2004 RNAM commenced portfolio management
services. During the year under review the company commenced offshore operations in
Mauritius by setting up a wholly owned subsidiary Reliance Asset Management (Mauritius)
Limited.In 2005 the company commenced offshore operations in Singapore by setting up a
wholly owned subsidiary Reliance Asset Management (Singapore) Pte Limited.In 2008 the
company executed a contract to provide discretionary portfolio management services to the
Employees' Provident Fund Organisation (acting through its Central Board of Trustees).

Reliance Capital Pension Fund Limited one of the Group Companies received a Certificate of
Commencement of Business as a pension fund manager from the Pension Fund Regulatory and
Development Authority (PFRDA) in 2009 and manages pension assets under the National
Pension System (NPS).In 2012 RNAM received the first tranche of investment from Nippon Life
Insurance Company Japan.In 2014 the company's subsidiary Reliance AIF Management
Company Limited was appointed as the manager' to the Reliance Capital AIF Trust.

During the year under review Reliance Mutual Fund launched a Japan focused open-ended
diversified equity scheme under the name Reliance Japan Equity Fund.In 2015 RNAM entered
into an investor advisory agreement with Samsung Asset Management (Hong Kong) Limited.
During the year under review Reliance Mutual Fund launched equity-oriented Retirement Fund.
During the year under review Quarterly Average Assets under Management (QAAUM) of
Reliance Mutual Fund crossed Rs 1.5 lakh crore.In 2016 the company acquired the asset
management rights of 12 schemes being managed by Goldman Sachs Asset Management (India)
Private Limited. During the year under review the company executed a contract to provide
discretionary portfolio management services to the Coal Mines Provident Fund Organization
(acting through its Board of Trustees).

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During the year under review the company's subsidiary Reliance AIF Management Company
Limited was appointed as the manager' to the Reliance Event Opportunities Trust.In 2017
Quarterly Average Assets under Management (QAAUM) of Reliance Mutual Fund crossed Rs 2
lakh crore.RNAM came out with an initial public offer (IPO) during the period from 25 October
2017 to 27 October 2017. The IPO was a combination of fresh issue of 2.45 crore equity shares by
the company and offer for sale of a total of 3.67 crore shares by promoter selling
shareholders. The stock debuted at Rs 294 on BSE on 6 November 2017 a premium of 16.66%
compared to the IPO price of Rs 252 per share.On 11 October 2018 Reliance Nippon Life Asset
Management Limited (RNAM) announced that it has received mandate from the Employees'
State Insurance Corporation (ESIC) to manage its funds. RNAM already manages mandates
from Employees' Provident Fund Organization (EPFO) The Coal Mines Provident Fund
Organization (CMPFO) and

The Pension Fund Regulatory and Development Authority (PFRDA) thus becoming the only
asset manager to manage all the four prestigious mandates.On 20 November 2018 Reliance
Mutual Fund (RMF) announced Further Fund Offer 3 (FFO3) of its Central Public Sector
Enterprises - Exchange Traded Fund (CPSE ETF). This FFO3 is part of the Government of
India's overall disinvestments program announced earlier by the Department of Investment and
Public Asset Management (DIPAM) Ministry of Finance using the ETF route.On July 13 2017
Nippon Life Insurance Company (NLI) an existing equity shareholder holding 44.57% stake in
the Company acquired an additional 4.43% stake by way of purchase of equity shares from
Reliance Capital Limited (RCL). Post this acquisition the equity stake of NLI in the Company
was increased to 49.00% and subsequently NLI was also classified as one of the Promoters of the
Company along with RCL.During the year 2017-18 the Company had allotted 576000000
number of fully paid up equity shares of face value of Rs.10/- each in August 2017 to the
Members of the Company in proportion of 1:50.During the year 2017-18 the Company came out
with its initial public offering (IPO) and diluted the 10% post issue capital in favor of the public.
Both the promoters of the Company (i.e. RCL and NLI) also participated in the IPO by way of an
offer for sale component and diluted part of their holdings in favor of the public. The total IPO
size was Rs.1542.24 Crores out of which the Company raised Rs.616.89 Crores as primary
subscription and the remaining proceeds of Rs.925.37 Crores were towards offer for sale.During
the year 2017-18 the Company has redeemed all the outstanding 3000000 number of preference
shares which were issued by the Company in the previous years.During the year 2017-18
Reliance Capital Pension Fund Limited ceased to be a subsidiary of the Company and became
Company's associate company.
Nippon India Mutual Fund (NIMF) is one of India's leading mutual funds, with Average Assets
Under Management (AAUM) of Rs 280,601.49 Crores (Oct 2021 to Dec 2021 QAAUM) and
151.96 lakhs folios (as on 31st Dec 2021).
NIMF which is one of the fastest growing mutual funds in India, offers investors a well-rounded
portfolio of products to meet varying investor requirements and has presence in 272 locations (as
of 24 January, 2022) across the country. NIMF constantly endeavours to launch innovative
products and customer service initiatives to increase value to investors.

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Nippon India Mutual Fund (NIMF) has been established as a trust under the Indian Trusts Act,
1882. Nippon Life Insurance Company(NLI) is the Sponsor and Nippon Life India Trustee Ltd
(NLITL) is the Trustee.
Nippon India Mutual Fund has been registered with the Securities & Exchange Board of India
(SEBI) vide registration number MF/022/95/1 dated June 30, 1995. Nippon India Mutual Fund
(NIMF) was earlier known as Reliance Mutual Fund. The name of Mutual Fund was changed
from Reliance Mutual Fund to Nippon India Mutual Fund effective September 28, 2019 . NIMF
was formed to launch various schemes under which units are issued to the public with a view to
contribute to the capital market and to provide investors the opportunities to make investments in
diversified securities.

4.Aditya Birla Sun Life Mutual Fund

The fund house manages over Rs 2,41,107 crore in AUM currently spread across 600+ schemes.
The AMC is a joint venture between Aditya Birla Group of India and Sun Life Financial Inc. of
Canada and was started in 1994. The company has now established a strong reputation and
gained wide recognition in the mutual fund industry. The Birla Sun Life Mutual Fund offers a
broad spectrum of mutual fund schemes ranging from diversified equity schemes to sector-
specific schemes. It also offers debts mutual funds, hybrid schemes, fund of fund schemes,
monthly income plans, and offshore funds. It boasts of a diverse range of investments and sound
financial portfolio. The company specializes in various investment objectives like tax savings,
personal savings, wealth creation etc. It is well known for its consistency in helping its customers
to reach their financial goals. The company’s schemes are well crafted to cater to the needs of the
investors. Some of the notable funds offered by the AMC include
Aditya Birla Sun Life Tax Relief 96
Aditya Birla Sun Life Balanced 95 Fund.
The company is a hugely trusted brand among investors and one of the first companies preferred
by novice investors. They specialize in tracking down the best companies and investing in them.
The company focuses on delivering transparent, ethical, research-based, and efficient capital
management services to give optimum benefits to its investors. The mutual fund schemes offered
by Birla SunLife Mutual Fund are highly formulated and are well researched. The help investors
to achieve their financial objectives, career goals, and due inheritance. The plans cover both
aggressive and conservative investors and cater to the various requirements of the investors.
Fund managers at Aditya Birla Sun Life Mutual Fund:

Mr. Mahesh Patil

Co-Chief Investment Officer, Equity:
As Co-Chief Investment Officer, Mahesh Patil spearheads Equity Investments at Aditya Birla
Sun Life AMC Limited. With over twenty-seven years of rich experience in fund and investment
management, Mahesh leads a team of twenty, comprising fund managers and analysts, managing
around INR 88,590 crores in equity assets.

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Mr. Maneesh Dangi
Co-Chief Investment Officer, Debt:
As Co-Chief Investment Officer, Maneesh Dangi spearheads Fixed Income investments at
Aditya Birla Sun Life AMC Limited. With over eighteen years of rich experience in Finance and
Research, Maneesh leads a team of twenty-two, comprising fund managers and analysts,
managing around INR 155,424 crores.

Mr. Anil Shah

Sr. Fund Manager:
He has over 24 years of experience in equity research and investments. He is B.Com, C.A, and a
Cost Accountant.

Mr. Ajay Garg

Sr. Fund Manager:
Ajay has over 15 years of work experience in financial services. He has a degree of B.E. in
Electronics and has an MBA in Finance.

Aditya Birla Sun Life Mutual Funds (ABSLMF) is a joint-venture company co-sponsored by the
Indian company, Aditya Birla Capital Limited and Canada-based financial service company, Sun
Life AMC Investments, Inc.

Headquartered in Mumbai, it was previously named Birla Sun Life Asset Management Company
Limited. It was established in 1994 and has successfully completed 25 years in the Indian
financial landscape.

Both the parent companies, Aditya Birla Group and Sun Life Financial, Inc., are significant
financial companies with a rich legacy of wealth creation and management. The Aditya Birla
Group is the 3rd largest business conglomerate in India, with gross revenue in excess of $41
billion.

Sun Life, on the other hand, is one of the largest life insurance providers in the world with
investment management as their other area of expertise. It ranks 236th on the Fortune 500 list.
ABSLMF is currently one of the largest asset management companies operating in India. With
cumulative average assets under management (AUM) exceeding Rs. 2,423 Crore as per the data
released by Association of Mutual Funds of India as of December 31, 2019.

Aditya Birla Sun Life Mutual Fund primarily deals in four classes of funds:
i. Equity funds
ii. Income funds
iii. Debt funds
iv. ELSS funds

The primary commitment of ABSLMF is to increase mutual fund penetration in India. As of

May 2019, there are over 83.2 million mutual fund folios in India aggregating over Rs. 25.43
trillion. It has quadrupled in the past decade alone, and ABSLMF has had a defining role in it.

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Out of the 83.2 million folios, ABSLMF alone manages over 6.8 million as of December 2018.
They have a pan-India presence spread across 269 locations, which includes metropolises and
small towns alike. Their agent network is over 200,000 strong along with 17,000 full-time
employees.

ABSLMF takes an active approach in making the entire mutual fund management process
straightforward and transparent to ease it for both investors and channel partners. Their portfolio
of financial products and services include sector-specific equity options, treasury and debt
products, fund of fund schemes and hybrid income funds, to name a few.

Established in 1994, Aditya Birla Sun Life Mutual Fund (ABSLMF) is co-sponsored by Aditya
Birla Capital Limited (ABCL) and Sun Life (India) AMC Investments Inc.

Having total domestic assets under management (AUM) of close to Rs. 2423 billion for the
quarter ended December 31st, 2018, ABSLMF is one of the leading Fund Houses in India based
on domestic average AUM as published by the Association of Mutual Funds of India (AMFI).
ABSLMF has an impressive mix of reach, a wide range of product offerings across equity, debt,
balanced as well as structured asset classes and sound investment performance, and around 6.8
million investor folios as of December 31st, 2018.

With a pan India presence across 269 locations, ABSLMF is committed to deepening mutual
fund penetration in the country. The company is ceaselessly working to enhance the appeal of
mutual funds across a wider set of investors and advisors across India. Part of this effort includes
introducing smart solutions, user-friendly services and conveniences which simplify mutual fund
processes with digitization for both – investors as well as distribution partners. ABSLAMF
provides sector specific equity schemes, fund of fund schemes, hybrid and monthly income
funds, debt and treasury products and offshore funds.

Company Information: Aditya Birla Sun Life AMC Limited (formerly known as Birla Sun Life
Asset Management Company Limited, Investment Manager for Aditya Birla Sun Life Mutual
Fund) One India Bulls Centre, Tower 1, 17th Floor, Jupiter Mill Compound, 841, S.B. Marg,
Elphinstone Road, Mumbai - 400 013. Tel.: 4356 8000. Website: www.adityabirlacapital.com.
CIN: U65991MH1994PLC080811

Aditya Birla Capital Limited (ABCL) is the financial services platform of the Aditya Birla
Group. With a strong presence across the life insurance, asset management, private equity,
corporate lending, structured finance, project finance, general insurance broking, wealth
management, equity, currency and commodity broking, online personal finance management,
housing finance, pension fund management, and health insurance business, ABCL is committed to
serving the end-to-end financial services needs of its retail and corporate customers. Anchored by
more than 17,000 employees, ABCL has a nationwide reach and more than 200,000 agents /
channel partners.

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5. SBI Mutual Fund
SBI Mutual Fund is managed by SBI Fund Management Company. SBI Fund Management
Company is India’s oldest asset management company. It boasts a rich history of over two and a
half decades in investing and fund management. The AMC is a joint venture between the State
Bank of India (SBI) and Amundi, a European Asset Management Company. The fund house
manages assets over Rs 2,05,273 crore and offers 550+ funds. It has an extensive reach in the
country with over 200 acceptance points all over. The user base of SBI Mutual Fund is well over
50 lakhs. The company is India’s one of the most trusted and popular mutual fund scheme
provider. The company is also a leading enterprise in terms of offshore fund management.

Some of the notable funds include:

 SBI Blue Chip Fund
 SBI Magnum Multi-Cap Fund.

SBI Mutual Fund is one of the most popular mutual fund company across the country. People
have huge trust in the AMC because of the high amount of safety offered by the schemes. SBI
MF is undoubtedly one of the most trusted brands in the country. Investing in SBI MF schemes
give you various advantages such as tax benefit and capital appreciation. SBI Mutual Fund has
expertise in managing both onshore and offshore funds and it also has a provision for NRIs to
invest in mutual funds in India.

Fund managers at SBI Mutual Fund:

Mr. Navneet Munot

Executive Director & Chief Investment Officer:
Navneet has more than 24 years of rich experience in Financial Markets. He is now responsible
for overseeing investments worth over USD 40 billion across various asset classes in mutual
fund and segregated accounts.

Mr. R Srinivasn
Head of Equity:
R Srinivasan is now the Head of Equity and also directly manages a number of funds. He has an
experience of over 25 years.

Mr. Rajeev Radhakrishnan

Head of Fixed Income & Fund Manager:

Rajeev currently heads the Fixed Income desk at the AMC. He has a degree of Engineering and
holds a Masters degree in finance from Mumbai University. He is also a charter holder of the
CFA Institute, USA.

Ms. Sohini Andani

Fund Manager:
Sohini joined SBIFM as Head of Research in 2007 and was subsequently promoted as a portfolio
manager in 2010.

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The financial objective should not only be driven by savings, but it also has to embrace wealth
appreciation across the time horizon. Over some years, mutual funds have emerged as one of the
popular instruments of investment. The fundamental reason behind its popularity is the flexibility
this fund provides. The provision of small investments like INR 500 through SIP and a wide
range of features in the market products renders it as a lucrative pick for the investors. The State
Bank of India Mutual Funds with more than 30 years of experience in fund management is one of
the leading concerns in the country. Analyzing this fact, SBI MF can be a suitable option for
investors willing to start their venture in the money market. Let us take a quick insight into its
history, information and investment tips.

SBI mutual fund: History

The SBI Mutual Fund is a joint project between the State Bank of India and AMUNDI (a French
international fund management company) which is a subsidiary collectively formed by Crédit
Agricole and Société Générale. It is widely known as the SBI Mutual Fund Trustee Company
Private Limited and was established as a Trust under the provisions of the Indian Trust Act 1882.
This is one of India’s largest bank sponsored mutual funds with its corporate headquarter in
Mumbai. This mutual fund has also launched an offshore fund, the Resurgent India Opportunity
Fund. Besides, it is being listed with the Securities and Exchange Board of India (SEBI). The
fund has a diverse profile of investors parking their money across 38 active schemes with the
management of over INR 42,000 crore assets.

SBI mutual fund: Information

Investment in SBI mutual funds have to be carried on through the four major types of funds
which are Equity Mutual Funds, Debt Mutual Funds, Tax Saving Mutual Funds and Hybrid
Mutual Funds.

Equity Mutual Funds: In the equity mutual funds, the investments are largely made on large-
cap, mid-cap and small-cap stocks. Over a longer duration, these funds provide a stellar
performance.

Debt Mutual Funds: The Debt mutual funds of SBI has a combination of both debt and fixed
income securities. The fixed-income securities comprise of the Government Securities, Treasury
Bills, and Corporate Bonds and money market instruments. These securities come with a fixed
rate of interest and a fixed maturity date.

Tax Saving Mutual Funds: SBI also has tax saving mutual funds that offer tax relief under
Section 80C of the Income-tax Act. These equity-based funds come with a lock-in period of
three years.
Hybrid Mutual Funds: Based on the investment objectives of the individuals, these hybrid
funds by SBI offers investment in a mixture of debt and equity in various proportion. These have
a high rate of interest and are less risky when compared to other categories of funds.

How to invest in SBI mutual funds

Investors need to login on the official website and create an account. Then they can select their
prefered mutual fund scheme and evaluate certain factors like risk, NAV, performance and

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others. After choosing the appropriate funds, investments can be made in SIP or lumpsum via net
banking mode. For the offline process, investors need to visit the branch in person. The SBI
mutual fund units will be allotted to the investor within five working days. In case, the KYC has
not been submitted; it needs to be carried out separately.

SBI mutual funds: Investment Tips

Know your risk tolerance: In mutual funds, there are various investments that incorporate
some amount of risk. The equity funds like mid and small-cap have the highest risk, along with
the highest potential returns. Debt funds in comparison offer lower risk with lower returns. The
hybrid fund is a mix of both equity and debt funds, and thus it provides a balance in risk and
returns. After analysing the risk and return equation, investors can pick up the best mutual funds
that meet their expectations.

Be clear about your financial objective: After analysing the risk factor, the next vital thing is to
determine how long you want to stay invested and how much you can invest. Mutual funds
being a highly flexible tool can offer you various routes to deliver your goal.

Prefer long-term growth strategy: There is no means by which mutual funds can provide you
with a short-cut route to become prosperous. There are a few short-term schemes in which you get
the chance to earn — however, investments over a time horizon help in getting the highest
rewards.

Monitor the funds timely to ensure success: By monitoring the funds timely, the investors can
detect which scheme is working properly and which wasn’t able to perform. This will help the
investor to make an informed decision and reallocate the funds in more lucrative plans.

Diversify the investments over time: In mutual funds, investors also get opportunities to
diversify the funds based on the market scenario. Equity-based schemes help in wealth
appreciation in long-term, while debt funds are relatively safer but offer lower returns.
Diversifying the portfolio with a balanced mix of both of these sounds a much prudent choice.

The NAV does not imply much: The NAV of the mutual funds has no implications that how
the funds will perform in future. This is the main reason why mutual funds are represented by
percentage growth figures.
These are some of the important information facts about SBI Mutual Funds and investors can
implement these tips at the time of investment.

The SBI Mutual Fund Trustee Company Private Limited was set up as a trust under the Trust Act
of 1882. This Trust controls the SBI Mutual Fund, one of India’s largest and oldest MFs. The
SBI Mutual Fund is a Joint Venture (JV) between one of India’s largest and most profitable
banks, the State Bank of India, and Amundi, which is a French asset management company.
The SBI Mutual Fund was set up on June 29, 1987 and was incorporated on February 7, 1992. It
was India’s second Mutual Fund after the Unit Trust of India started operations in 1963. In July
2004, SBI decided to divest 37% of the Fund and roped in Amundi as a partner.

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Amundi is an asset management major created jointly by Crédit Agricole and Société Générale.
SBI MF has many firsts to its name. It was the first Indian Mutual Fund player to launch a
‘Contra’ fund, called the SBI Contra Fund. In 2013, SBI Mutual Fund India acquired Daiwa
Mutual Fund, part of the Daiwa Group of Japan.

SBI Mutual Fund is the first in India to launch an ESG Fund. An acronym for Environment,
Social and Governance, the fund provides resources for sustainable investment in major markets.
In 2015, the Employees’ Provident Fund of India invested Rs 5,000 Crore for the first time in a
Mutual Fund in India via SBIMF Sensex ETFs or Exchange Traded Funds.

As of March 2021, the SBI Mutual Fund manages assets worth Rs. 504455.21 crores. In early
2019, it moved past Aditya Birla and HDFC Mutual Funds to emerge as the 3rd largest Mutual
Fund body in India based on Assets under Management or AUM.

6.UTI Mutual Fund

UTI was founded in 1963 and is one of the first asset management companies in India. The
AMC, UTI Mutual Fund is sponsored by the four biggest institutes in the public sector: SBI,
PNB, BoB, and LIC. Being the first company to offer mutual fund, UTI offers some of the best
schemes with assured returns. Investment in UTI easy and can be accessed at any time of the
year. UTI Mutual Fund schemes are managed by the sharpest minds in finance domain and hence
the yields from their schemes are reliable and in line with their capital appreciation objectives.
With nearly 1400 funds, the AMC manages over Rs 1,53,364 crore in AUM and offers fund
across multiple categories. Some of the notable funds across categories include:
 UTI Equity Fund

 UTI Bond Fund

UTI AMC is India’s one of the most trusted wealth creators and is well known to care for the
interest of its investors in its heart. UTI AMC has been India’s leading financial service
institution for almost 50 years and it was a primary vehicle of Indian Citizens for investing in the
capital market until the early ’90s. The institution has shown incredible versatility and has
developed from quality to quality beating economic changes and volatilities and worldwide
turnarounds. UTI AMC has contributed significantly to the development of the industrial and
capital sector of the Indian markets. It has spearheaded the transformative ingenuities such as
rural outreach programs, developmental financial institutions, and financial products and
services. UTI AMC manages assets across different businesses, which include Portfolio
Management Services, domestic mutual fund, Retirement Solutions, International business,
Alternative Investment assets, and Venture Funds.

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Fund managers at UTI Mutual Fund are:

Mr. Vetri Subramaniam

Group President & Head-Equity:

Vetri Subramaniam is Group President & Head of Equity at UTI Asset Management Company
Ltd. He has been in this role since January 2017. UTI MF manages assets of Rs 1524 bn and the
total assets under management of UTI are Rs 3615 bn.

Mr. Amandeep Chopra

Group President & Head-Fixed Income:

Mr. Amandeep Singh Chopra is the Group President & Head of Fixed Income of UTI AMC Ltd.
He serves on the Executive Investment Committee (EIC), the Valuation Committee and the
Management Committee of UTI AMC Ltd. He is also a member of the Valuation Committee of
the Association of Mutual Funds in India (AMFI) and was also a member of the Corporate
Bonds and Securitization Advisory Committee (CoBoSAC) of SEBI which advises SEBI on
issues related to further developments of these markets.

Mr. Sanjay Ramdas Dongre

Executive Vice President and Sr Fund Manager – Equity:

Mr. Sanjay Dongre is Executive Vice President and Sr Fund Manager – Equity at UTI AMC Ltd.
He is a B.E. (Instrumentation) graduate from College of Engineering and a PGDM from IIM
Calcutta.

Ms. Swati Kulkarni, Executive Vice President, and Fund Manager:

Ms. Swati Kulkarni is Executive Vice President and Fund Manager – Equity at UTI AMC Ltd.
After her graduation in Commerce, she went on to earn her Masters in Financial Management
from Narsee Monjee Institute of Management Studies from the University of Mumbai, where she
also distinguished herself as a rank holder.

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank of India. The history of mutual funds in
India can be broadly divided into four distinct phases
First Phase - 1964-1987
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700
crores of assets under management.

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Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up
funds in India and also the industry has witnessed several mergers and acquisitions. As at the end
of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit
Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual
funds.
Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund industry
has entered its current phase of consolidation and growth.
The graph indicates the growth of assets over the years.

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Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit
Trust of India effective from February 2003. The Assets under management of the Specified
Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the
industry as a whole from February 2003 onwards.

AMCs have implemented various technological measures in order to enhance customer

engagement from various sectors of the society. Two programmes that have been introduced by
AMCs are the Investor Awareness Programme (IAP) and District Adoption Programme (DAP).
These programmes improve awareness in locations with limited penetration of mutual funds,
regarding the assets and their benefits.
Other technologies that are being used by AMCs are internet applications, mobile applications
and social media. These companies have improved their online interface for ease of access and
use. They are also using mobile apps to enable investors to track their investments and to
monitor their transacting portfolios. WhatsApp, Facebook and other social media platforms are
being used in order to enhance user experience and integrate various services. Social media
platforms have been recognized as an effective channel to leverage technology that would assist
in investment and mobile applications to engage more customers from different segments.
HNIs are the key target segment for AMCS and therefore several custom-made programmes are
being initiated by them in order to enhance their engagement. There are various mass outreach
programmes that are held by AMCs in order to enable growth in the mutual fund industry and to
ensure maturity of the individual customer investments.
Changes to Mutual Fund Industry – SEBI Initiatives
SEBI has dictated various initiatives and directives in order to regulate the mutual fund industry
and to protect investor interests. These can be classified into three segments –

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 Protecting investor interests – SEBI has introduced various directives to protect investor
interests. These are as follows:
 Promote transparency by introducing higher disclosures by an Asset Management Company
(AMC).
 Prevent mis-selling by making changes to the commission structure.
 Merging me-too schemes and not giving approval to NFO issuances that are in non-
compliance to this rule.
 Introducing “riskometer” infographics in all mutual fund product brochures in a
comprehensive and easily understandable format.
 Increasing reach and lowering costs – SEBI offers the following solutions for increasing
reach and lowering costs:
 Launching the MF Utility Portal that would enable investors to trade through a Common
Account Number.
 Areas other than T15 will have differentiated TER for encouraging the sale of direct plans.
 Issuing consolidated account statements.
 Safeguarding the health of mutual fund industry – In order to safeguard the health of the
Indian Mutual Fund Industry, the following regulations are laid down by SEBI:
 Making it mandatory for AMCs to have a capital base of Rs. 500 Million by the year 2017,
from its current value of Rs. 100 Million.
 Proposing the analysis of compensation details for assessing fixed costs of AMCs.
 Conducting stress tests on a regular basis.

Current Status of Indian Mutual Fund Industry

The Indian Mutual Fund Industry has recorded Rs. 13, 460 billion Assets Under Management
(AUM) by December 2015 and is reporting a steady growth till date. Initially, corporates had
been the main contributor to AUM but soon, the retail segment proved to be the segment that
contributed the most to AUM growth in India.
GST rate of 18% applicable for all financial services effective July 1, 2017.

7. Kotak Mahindra Mutual Fund

Kotak Mahindra Bank is the fourth biggest private sector bank in India and has an AA+ brand
rating. The brand value of Kotak Mahindra is over US$481 million. The company ranks at a
respectable rank of 245 among the top 500 banks across the globe. The company offers more
than 40 schemes for investors to choose from depending on their risk profile and time horizon.
The AMC offers different schemes with variable risk according to the specific customer
requirement. It was the first fund house in the country to launch a dedicated gilt fund scheme.
The company operates in over 70 cities in India currently and has a healthy network of more than
75 branches to help the customers. The AMC has AUM of over Rs 1,19,800 crore, and the fund
house offers over 300 funds. Some of the notable funds by Kotak Mahindra MF include:
 Kotak Select Focus Fund
 Kotak Taxsaver Fund.

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Kotak Mahindra Mutual Fund was launched in the year 1998 and has its headquarters in Bandra,
Mumbai. Majority of mutual fund schemes offered by Kotak MF have high credit ratings. Kotak
AMC offers a wide range of schemes that offer you benefits such as wealth creation and tax
rebates.

Fund managers at Kotak Mahindra Mutual Fund:

Ms. Lakshmi Iyer

Chief Investment Officer (Debt) & Head Products:

Joined KMAMC in 1999 as a fund manager, and was responsible for credit research as well as
deal execution, managing fund performance across all debt funds and assisting sales in client
interaction.

Mr. Abhishek Bisen

Vice President & Fund Manager (Debt):

Associated with the company since October 2006 and his key responsibilities include fund
management of debt schemes. The schemes managed by him are Kotak Monthly Income Plan,
Kotak Bond, Kotak Gilt Investment (Regular & PF-Trust), Kotak Multi Asset Allocation Fund,
Kotak Balance, Kotak Equity Savings Fund, Kotak Global Emerging Market Fund, Kotak Gold
Fund, and Kotak Gold ETF.

Mr. Deepak Agrawal

Vice President & Fund Manager (Debt):

Over 16 years of experience in Research, Dealing and Fund Management. He is managing Kotak
Bond Short Term, Kotak Banking & PSU Debt Fund, Kotak Dynamic Bond Fund, Kotak
Savings Fund, Kotak Liquid, Kotak Money Market Scheme, Kotak Credit Risk Fund, Kotak
Medium Term Fund, Kotak Corporate Bond Fund, Kotak Low Duration Fund, FMPs & QIPs.

Mr. Harsha Upadhyaya

Chief Investment Officer – Equity:

Harsha Upadhyaya heads the equity desk at KMAMC, and also directly manages funds such as
Kotak Standard Multicap Fund, Kotak Equity Opportunities Fund, and Kotak Tax Saver. Harsha
has over two decades of experience spread across equity research and fund management.

Kotak Mahindra Asset Management Company Limited (KMAMC) is a public limited company
registered under the Companies Act, 1956 on August 2, 1994. The company is the asset manager
of Kotak Mahindra Mutual Fund (KMMF) and a wholly and a subsidiary of Kotak Mahindra
Bank Limited (KMBL).

Kotak Mutual Fund began its operations back in December 1998. It was the first AMC to offer a
dedicated gilt fund for investing solely in Government securities.
It provides mutual fund and portfolio management services under SEBI ('Mutual Funds')
Regulations, 1996 and SEBI (Portfolio Manager) Regulations, 1993. KMAMC also offers
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pension fund management services through its subsidiary, the Kotak Mahindra Pension Fund
Limited.

Currently, the company offers around 261 schemes catering to the variable risk appetite of
investors. It primarily invests in AAA and AA rated companies and possesses a substantial value
of assets under management (AuM). KMAMC also provides customers with the option to avail
income tax benefits under Section 80C.

As of 31st Jan 2021, the asset under management of Kotak AMC is 2.37 lakh crore. The
company has a net worth of Rs. 764.43 Bn, market cap of INR 2,692.06 Bn, and around 50,000+
employees.
KMAMC has 84 branches spread over 80 cities in India and has more than 7.5 Lakh investors.

8.Franklin Templeton Mutual Fund

Franklin Templeton is an American company that was established in 1947. The company’s
Indian office was set up in 1996 and ever since its AUM has been growing rapidly. Some of the
notable funds include:

 Franklin India Flexi Cap Fund

 Franklin India Low Duration Fund

Franklin Templeton Mutual Fund is sponsored by Templeton International Inc. Its assets are
managed by Templeton Asset Management. This AMC is one of the oldest AMCs in India. In
2002, it acquired Pioneer ITI and added considerably to its user base. It aims to build a company
with a broad range of investment experience and has built profitable mutual fund portfolios.
Since the consolidation, the business has scaled substantially. This has catapulted Franklin
Templeton to be considered as one of the top fund houses in India. The company focuses on
short-term market fluctuations, revenues, cash flows, and the intrinsic value of the company to
provide the perfect solution to the customer query.

Here are some of the fund managers at Franklin Templeton AMC:

Mr. K. N. Sivasubramanian
Chief Investment Officer, Equity:

He is responsible for overseeing Franklin Equity Team’s local India Funds.

Mr. Anand Vasudevan

Sr. Vice President, Equity:
He is working as a fund manager for Franklin Equity Team. He has B.Tech degree from IIT
Madras, PGDM from IIM Calcutta, and Masters in Finance from London Business School. He
has an overall experience of over 10 years.

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Mr. Rajat Malhotra:
Raja has a Masters degree in Computational Finance (USA), a Bachelor’s of Computing
(Computer Science) from NUS Singapore. He has over 6 years of experience in this industry. He
is responsible for fund and investment management at Franklin Templeton.

Franklin Templeton Investments’ inception dates back to 1947. Since its foundation, the
company has offered asset management service for retail, institutional, and high-value clients.
It not only offers mutual funds but also other investment vehicles like exchange traded funds
(ETFs), private funds, and separately-managed accounts. Under these vehicles, the company
offers schemes like equity, fixed income, multi-asset, and alternatives. Franklin Templeton
Investments also offers a platform for portfolio, trading, research, and investment risk
management.

Currently, Franklin Templeton has presence in over 34 countries. It has more than 600
investment professionals and employs in excess of 9,500 individuals. The company has $724.1
billion assets under management worldwide.

Franklin Templeton in India

Franklin Templeton Investments began its operations in India back in 1996 under the name
Templeton Asset Management India Pvt. Ltd. The trust, Franklin Templeton Mutual Fund, is
registered with SEBI under the registration number MF/026/96/8.
The first fund that the company offered in September 1996 was the Templeton India Growth
Fund. In India, the Franklin Templeton has 21 funds that have completed 10 years and several
others that have crossed the 20-year mark.

Back in 2002, the company acquired another fund house - Pioneer ITI AMC Ltd. (a joint venture
between Pioneer and the Investment Trust of India) to become the largest mutual fund in India
after Unit Trust of India.
Franklin Templeton Investments is one of the few asset management companies that offer an in-
house registrar for its clients for better service management and quality.
The company also offers loyalty programs where clients can get to engage with the fund
management team, get invited to external management development programs, annual thought
leadership platforms, and other extensive engagement events.

Templeton Asset Management India Pvt. Ltd. has also undertaken various CSR initiatives like:
 Installation of 4 water purifier plants to support 6000 families in partnership with the
Bala Vikasa Social Service Society.
 Facilitate the process of providing 5000 rickshaws in partnership with the American India
Foundation Trust.
 Establish 50 camps to impart vocational skills to 2000 youth in partnership with the
Kherwadi Social Welfare Association.
 Providing support to about 2353 girl children in Chennai in partnership with the K. C.
Mahindra Educational Trust.
 Adoption of Abhudaya English Medium School, Mumbai in partnership with The
Akanksha Foundation.

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As per Statement of Additional Information (SAI) provided by SEBI, Franklin Templeton
Investments had a total income of $6,392.2 million, profit after tax of $1,696.7 million, and a net
worth of $14877.7 million back in 2017.As of 31 March 2019, Templeton Asset Management
India Pvt. Ltd. currently offers around 197 schemes with an asset under management (AuM) of
Rs. 1.19 Lakh Crore.
9. DSP Mutual Fund

Initially, AMC was a joint venture between the 150-year old DSP and BlackRock Group.
Recently, DSP decided to buy out the 40% stake of BlackRock Inc in the joint venture. This lead
to DSP BlackRock Mutual Fund renamed to DSP Mutual Fund. With AUM of over Rs 86,255
crore and over 250 funds, the fund house has made a notable name in the mutual fund industry.
Some of the notable funds include:
 DSP Focus 25 Fund
 DSP Opportunities Fund

DSP is among the oldest business groups in India. It has a rich and strong history of more than
145 years. DSP MF offers a wide range of mutual fund schemes. DSP’s Equity fund schemes are
considered to be its flagship products. The company is well known for providing custom-made
mutual fund schemes according to the need of their investors. Many of the mutual fund schemes
offered by DSP Mutual Fund are highly popular in the market and are often considered as a
benchmark for comparison with other mutual fund schemes.
Here are some of the fund managers at DSP Mutual Fund:

Mr. Apoorva Shah

Fund Manager:
Apoorva has a Post Graduate Diploma in Management (PGDM) from the Indian Institute of
Management (IIM), Ahmedabad. He as an overall work experience of over 25 years of in the
sector of banking and investment.

Mr. Atul Bhole

Fund Manager:
Atul has over 10 Years of experience and his Masters in Management Studies from Jamnalal
Bajaj Institute of Management Studies. He has also cleared his Chartered Accountancy exams.

Ms. Gauri Sekaria

Fund Manager:
Gauri is the fund manager of the DSP Equal NIFTY 50 Fund and has more than 12 years of
experience in managing passive funds across various Index Funds and ETFs.

Mr. Gopal Agrawal

Senior Fund Manager:
Gopal has more than 20 years of experience in this industry. He has extensive experience in
sectors like Oil & Gas, Petrochemicals, Capital Goods, Power, Metals, Shipping, Chemicals &
Fertilizers and Engineering.

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For over two decades, we have been helping investors make responsible money decisions on the
bedrock of two simple values: Honesty & Integrity. This has helped us gain the trust of lakhs of
investors and thousands of MF distributors & investment advisors from across India.

We feel honoured that our family of investors come from all walks of life: hard-working salaried
people, high-net-worth individuals, NRIs, small & mid-sized business owners, large private &
public corporations, trusts and foreign institutions. This gives us a lot of pride and a deep sense of
responsibility. Our resolve remains strong, to always be an organization with a purpose -
helping investors gain confidence by making more responsible investment decisions.

DSP Investment Managers unveiled its new brand identity today. DSP BlackRock Investment
Managers Pvt. Ltd. will now be known as DSP Investment Managers Pvt. Ltd. and DSP
BlackRock Mutual Fund will be known as DSP Mutual Fund.

DSP Group had signed an agreement in May 2018 to buy out BlackRock’s 40 per cent stake in
their joint venture DSP BlackRock Investment Managers Pvt. Ltd. (earlier, DSP Group was the
majority partner and owned 60 per cent while BlackRock owned 40 per cent). The transaction
was completed on August 16, 2018. Arpwood Capital Private Limited was the exclusive
financial advisor and TT & A was the legal advisor to the DSP Group for the transaction.

DSP Group’s joint venture arrangement with Merrill Lynch Investment Managers in 1996
established its retail asset management business in India, DSP Merrill Lynch Asset Management
(India) Ltd. This business went on to become DSP BlackRock Investment Managers Pvt. Ltd. in
2008, after BlackRock Inc. took over Merrill Lynch’s global asset management business in 2006.
In August 2018, the DSP Group completed the buyout of BlackRock’s 40 per cent stake in DSP
BlackRock and changed its name to DSP Mutua ..

DSP Mutual Fund manages assets in excess of Rs 97,000 crore across equity, fixed income and
alternatives as on 31st July 2018 with over 23 lakh individual investors.

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10.IDFC Mutual Fund

IDFC Ltd was set up by the Government of India in 1997. IDFC Mutual Fund is wholly managed
by IDFC Asset Management Company Ltd. The AMC provides different products and schemes
for institutional investors as well as individual investors. The company aims to develop assets
through measures like savings in equity and debt markets. AMC’s investments and portfolios
around infrastructure are one of the best in the markets. IDFC has a strong connection with the
private sector and government. This helps it to offer smart and unbiased wealth management and
growth advice and help investors. There are over 50 mutual funds schemes in place to cater to
the needs of the investors. The AMC launched its first mutual fund in 2000 and currently has
around 300 funds to offer with AUM of over Rs 71,388 crore. Some of the notable funds offered
by IDFC Mutual Fund include:
 IDFC Super Saver Income Fund
 IDFC Large-Cap Fund

Here are some of the fund managers at IDFC MF:

Mr. Daylynn Pinto

Associate Director – Fund Management:
Experience spanning over 12 years in the mutual fund industry. He holds Post Graduate Diploma
in Management (PGDM) and Bachelor’s degree in Commerce

Mr. Rajendra K. Mishra

Fund Manager:
The overall experience of 15+ years (including 12+ years in Equities & Investments). He is an
MBA from Indian Institute of Management, Lucknow, and Engineering from National Institute of
Technology, Jamshedpur

Mr. Sunil Nair

Senior Vice President Fund Management:
Experience of over 19 years in Equity Dealing. He holds a Bachelors Degree in Arts.

Mr. Sumit Agrawal

Vice President – Fund Management at IDFC Asset Management Company Limited:
More than 12 years’ experience in the Finance Industry. He holds PGDM in Finance, Chartered
Financial Analyst (USA) and is a Company Secretary affiliated with Institute of Company
Secretaries of India and Bachelor Degree in Commerce.

IDFC Limited erstwhile Infrastructure Development Finance Company Limited is a financial

conglomerate and is registered with Reserve Bank of India as an NBFC. It is a holding company
mainly holding investment in IDFC Financial Holding Company Limited (IDFC FHCL) which is
a non-operative financial holding company. IDFC FHCL in turn holds investments in IDFC
Bank IDFC Asset Management Company Limited IDFC Alternatives Limited IDFC Securities
Limited and IDFC Infrastructure Finance Limited. As on 31 March 2018 the Company has
eleven domestic direct / indirect subsidiaries and 4 foreign indirect subsidiaries. IDFC's main
subsidiary is IDFC Bank. Besides banking it also has investments in various financial services

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businesses such as Asset Management (both public markets and private markets) Institutional
Broking & Research and Infrastructure Debt Fund. All these businesses are carried out through
independent subsidiaries. IDFC holds all these investments under IDFC Financial Holding
Company Limited. The network of IDFC Bank as on March 31 2018 comprises 150 branches
387 Corporate Business Correspondent (BC) branches 85 ATMs and 17474 customer access
points'. Of the 150 branches 50 branches are in the top 35 cities in India. The remaining 100
semi-urban and rural branches are across Madhya Pradesh Karnataka Andhra Pradesh Gujarat
Rajasthan Tamil Nadu Tripura and Meghalaya.Infrastructure Development Finance Company
Ltd was incorporated on January 30 1997 as a public limited company with their registered
office at Chennai. In the year 1994 the Department of Economic Affairs MoF in recognition of the
need to develop the country's infrastructure established an Expert Group on
Commercialization of Infrastructure Projects under the chairmanship of Rakesh Mohan. The
group reviewed the existing state of infrastructure in the country including the state of corporate
debt market to provide long-term funds to infrastructure projects and recommended the need for a
specialized financial intermediary for funding infrastructure projects. Thus the company was
formally incorporated.

The company commenced their business activities on June 9 1997.In the year 1998 the company
registered with the Reserve Bank of India (RBI) as a Non Banking Financial Company (NBFC).
In the year 1999 the company was notified as Public Financial Institution. In the year 2000 the
company was registered with the Security Exchange Board of India (SEBI) as a merchant banker
and as an underwriter. Subsequently in the year 2001 they made a registration with the SEBI as a
debenture trustee. Also the company set up Infrastructure Development Corporation (Karnataka)
Ltd pursuant to a shareholders agreement between IDECK and the Governor of the State of
Karnataka HDFC and the company.In the year 2002 the company incorporated IDFC Asset
Management Company Ltd as a subsidiary company. Also they incorporated a joint venture
company namely Uttaranchal Infrastructure Development Company Ltd with Government of
Uttarakhand. In the year 2003 India Development Fund was formed in which the company was a
sponsor investor. In August 2005 the company's equity shares were listed on NSE and BSE
pursuant to an initial public offering. In the year 2006 they successfully raised $450 million for
their second infrastructure focused private equity fund. In June 2006 the company entered into an
MoU with SBI Capital Markets Ltd for syndication of debt financing for Infrastructure projects.
During the year 2006-07 the company increased their stake in National Stock Exchange of India
Ltd to 8.2% by acquiring an additional 6% stake. Also they acquired 8.71% stake in the Asset
Reconstruction Company (India) Ltd.

The company along with Citigroup India Infrastructure Finance Company Ltd and the global
private equity player Blackstone launched a landmark USD 5 billion initiative for financing
infrastructure projects in India. During the year the company also set up IDFC Project Equity
Company Ltd to manage the proposed USD 2 billion third party equity component of the 'India
Infrastructure Initiative'. Also the company acquired 33.33% stake in SSKI Securities Pvt Ltd
(SSKI) which is a domestic mid-size investment bank and an institutional brokerage and research
platform with membership of the BSE and the NSE.In May 2008 the company entered into asset
management by acquiring the AMC business of Standard Chartered Bank in India namely
Standard Chartered Asset Management Company Pvt Ltd and Standard Chartered Trustee
Company Pvt Ltd and the acquired companies was re-branded as IDFC Asset Management

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Company Pvt Ltd and IDFC AMC Trustee Company Pvt Ltd respectively.During the year 2008-
09 IDFC - SSKI Ltd subscribed 100% of equity shares of IDFC Capital (Singapore) Pte Ltd a
company incorporated in Singapore for an emerging markets private equity fund-of-funds
business.

During the year the company established IDFC Foundation to focus on capacity building policy
advisory and sustainability initiatives. Also the company became a part of Nifty 50 during the
year.During the year 2009-10 the company consolidated their position as the country's leading
specialist infrastructure finance company and one of the largest financiers of infrastructure in the
country with most of their businesses scaling new heights. The company increased their equity
stake from 80% to 100% in IDFC Securities Ltd. Also the company along with their wholly
owned subsidiary subscribed 100% equity shares of IDFC Pension Fund Management Company
Ltd. During the year IDFC Capital Ltd subscribed 100% of equity shares of IDFC Fund of Funds
Ltd and IDFC General Partners Ltd. Also the company's 100% subsidiary IDFC Projects Ltd
acquired 51% of equity shares of Dheeru Powergen Private Ltd. In January 2009 IDFC Projects
Ltd signed a MoU with Gujarat State Energy Company Ltd and Bharat Heavy Electricals Ltd
(BHEL) to establish a 1600 MW Thermal Power plant at Sarkhadi based on supercritical
technology. Also they signed a MoU with Government of Gujarat to establish a 10 MW Solar
Power Project.During the year 2010-11 Jetpur Somnath Highway Ltd (earlier known as IDFC
Capital Company Ltd and a direct subsidiary of IDFC) became a subsidiary of IDFC Projects
Ltd.

A company under the name of Jetpur Somnath Tollways Ltd was incorporated as a Subsidiary of
IDFC Projects Ltd. IDFC Projects alongwith the other companies further floated Dheeru
Powergen Ltd which was converted from Private Limited Company to a Public Limited
Company.IDFC Asset Management Company Ltd further floated IDFC Pension Fund
Management Ltd one of the Pension Fund Managers appointed by the Pension Fund Regulatory
and Development Authority (PFRDA) to manage retirement funds under the New Pension
Scheme (NPS) open to individuals in the private sector and IDFC Investment Advisors Ltd.

A company under the name of IDFC Investment Managers (Mauritius) Ltd was has been
incorporated as a Subsidiary of IDFC Asset Management Company Ltd.During the year IDFC
Foundation (a Non- Profit Organisation) was incorporated as a wholly owned subsidiary
company of IDFC. Further the shares of the three Joint ventures namely Infrastructure
Development Corporation (Karnataka) Ltd (iDeCK) Uttarakhand Infrastructure Development
Company Ltd (UDeC) and Delhi Integrated Multi-Modal Transit System Ltd (DIMTS) which
were initially held by IDFC was transferred to IDFC Foundation and similarly the units of the
Trust namely India Infrastructure Initiative Trust & India PPP Capacity Building Trust which
were initially held by IDFC was also transferred to IDFC Foundation. Further during the year
Uniquest Infra Ventures Pvt Ltd was incorporated as a direct subsidiary of the company and
IDFC Capital USA Inc. was also incorporated as a subsidiary company of IDFC Securities
Ltd.On 3 June 2011 IDFC and Khazanah agreed to enter into a joint venture (JV) to set up a
dedicated infrastructure development company with a focus on road sector in India. Khazanah
would hold 80.1% of the equity share capital in the proposed JV and the balance would be held by
IDFC. Khazanah and IDFC also propose to invest in convertible instruments issued by the JV.
The first investment of this JV will be in Jetpur Somnath Tollways Limited (JSTL) subject to

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receipt of necessary regulatory approvals and permissions including those from the National
Highway Authority of India. Khazanah is the investment holding arm of the Government of
Malaysia entrusted to manage the assets held by the Government and to undertake strategic
investments.

At the time of announcement of Q1 June 2011 results IDFC on 27 July 2011 announced that its
Balance Sheet size crossed Rs 50000 crore mark as on 30 June 2011.In November 2011 SNC-
Lavalin Group Inc. and the company announced a joint venture that began with an introduction by
Export Development Canada (EDC). The new company called Piramal Roads Infrastructure Ltd
will work to develop a portfolio of road assets in India.On 9 December 2011 IDFC and
Natixis Global Asset Management (NGAM) announced that NGAM has acquired a 25% stake in
IDFC Asset Management Company (IDFC AMC) and IDFC AMC Trustee Company (IDFC
AMC Trustee). IDFC AMC is the investment manager of IDFC Mutual Fund and is the IDFC
group's asset management platform focused on retail and institutional investors in the public
market. NGAM is one the largest asset managers in the world.On 22 February 2012 IDFC
informed the stock exchanges that the company has filed the Offering Circular with Singapore
Exchange Securities Trading Limited (the 'SGX-ST') for listing of notes to be issued pursuant to
the company's US$ 1500000000 (or its equivalent in other currencies) Medium Term Notes
Programme (MTN).The name of the company was changed from Infrastructure Development
Finance Company Limited to IDFC Limited with effect from 20 July 2012.On 18 March 2014
IDFC Ltd announced the operationalization of DFID-IDFC loan programme that will support
infrastructure projects in the low-income states of India.

The programme was launched in October 2013.IDFC was granted an in-principle approval by
Reserve Bank of India (RBI) on 9 April 2014 to set up a new bank in the private sector under
Section 22 of the Banking Regulation Act 1949. Accordingly a new company namely IDFC
Bank with a paid up capital of Rs 5 lakh was incorporated on 21 October 2014 at Chennai Tamil
Nadu under the Companies Act 2013 to carry out the business of banking. As per the terms and
conditions contained in the in-principle approval and the RBI New Banking Guidelines IDFC
was required to transfer Financing Undertaking to IDFC Bank. Accordingly the Board of
Directors of IDFC at its meeting held on 30 October 2014 approved a proposal to demerge its
Financing Undertaking into its wholly owned step down subsidiary - IDFC Bank under a
Demerger Scheme.

On December 26 2014 the entire equity stake of IDFC Bank held by IDFC was transferred to
IDFC Financial Holding Company Limited (IDFC FHCL) thereby making IDFC Bank a wholly
owned subsidiary of IDFC FHCL which in turn is a wholly owned subsidiary of IDFC. Pursuant
to the Scheme of Demerger IDFC Bank issued and allotted 159.40 crore-equity shares to
shareholders of IDFC thereby reducing the shareholding of IDFC FHCL from 100% to 53%. The
Capital Raise Committee of Directors of IDFC by a special resolution dated 16 September 2014
approved the allotment of 7.3 crore-equity shares at a price of Rs 137 per share aggregating Rs
1000.10 crore to Qualified Institutional Buyers. On 31 July 2015 IDFC announced that ahead of
its transition into a bank it plans to take additional provisions of approximately Rs 2500 crore in
Q2 September 2015 against coal and gas power assets to make sure that in the aggregate 50-60%
has been provided for against stressed loan assets many of which will not be NPAs on 30
September 2015. IDFC said it plans to create these additional provisions by utilizing non-

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distributable special reserves that have been created over the past several years subject to
appropriate approvals. The net impact these additional provisions will be a reduction in net worth
by about Rs 1600 crore.On 20 August 2015 IDFC announced that it has entered into non-binding
letter of intent with Dilip S Shanghvi and Telenor Financial Services AS for setting up a
Payment Bank wherein IDFC and/or its affiliates would hold 19.99% stake. Dilip S Shanghavi is
one of the successful applicants who have been awarded the in-principle approval by the Reserve
Bank of India for setting up a Payment Bank.On 4 March 2017 IDFC announced that it has
decided to acquire the entire remaining stake of approximately 25% held by Natixis Global Asset
Management (NGAM) in IDFC Asset Management Company (IDFC AMC) and IDFC AMC
Trustee Company (IDFC AMC Trustee).

The acquisition is for a cash consideration of Rs 244.24 crore. IDFC AMC is a well established
SEBI registered Mutual Fund house in India sponsored by IDFC with average assets under
management (AUM) of about Rs 57998 crore on 31 December 2016. IDFC Group and Shriram
Group signed an exclusivity agreement on 8 July 2017 to allow for due diligence and discussions
to arrive at an agreement on a transaction structure and swap ratio for a strategic combination
between certain businesses of the Shriram Group with IDFC Limited and IDFC Bank. However
despite best efforts the two groups were not able to reach an agreement on a mutually acceptable
swap ratio. Accordingly the exclusivity period was terminated with effect from 30 October
2017.On 28 April 2018 IDFC announced that IDFC Alternatives Limited a wholly owned step
down subsidiary of IDFC through IDFC Financial Holding Company Limited has entered into a
definitive agreement with Global Infrastructure Partners India for the sale of its infrastructure
asset management business. This sale will conclude on the receipt of the requisite regulatory
approvals as applicable. IDFC Alternative will continue to manage Private Equity and Real
Estate funds and the aforementioned sale to Global Infrastructure Partners India will not have
any impact on its Private Equity and Real Estate verticals.The Board of Directors of IDFC Bank
and Capital First Limited at their respective meetings held on January 13 2018 had approved a
composite scheme of amalgamation of Capital First Capital First Home Finance Limited and
Capital First Securities Limited with IDFC Bank and their respective shareholders and creditors
under Sections 230 to 232 and other applicable provisions of the Companies Act 2013.

The share exchange ratio for the Amalgamation was approved to be 139 fully paid-up equity
shares of IDFC Bank for every 10 fully paid-up equity shares held in Capital First. As on the
date of this report the Scheme has received; a. Approvals from National Housing Bank and
Competition Commission of India; b. Approvals from BSE Limited and National Stock
Exchange of India Limited; c. No Objection Letters from BSE Limited and National Stock
Exchange of India Limited under Regulation 37 of SEBI LODR Regulations; d. No Objection
Letter from RBI under RBI (Amalgamation of Private Sector Banks) Directions 2016. IDFC
Bank has filed an application with the National Company Law Tribunal (NCLT) Chennai Bench
seeking its direction for convening meetings of the Shareholders and Creditors of IDFC Bank.
On receipt of directions from the NCLT IDFC Bank shall convene meetings of its Shareholders
and Creditors as may be required. Subsequent to the receipt of approval of the Shareholders and
Creditors IDFC Bank shall file a Petition with the NCLT for its final approval to the
Scheme.During the year 2018 the Bank strengthened its Wealth Management offering. It also
launched its NRI Banking services to complete its liability product suite. To deepen financial
inclusion IDFC Bank has placed a special emphasis on taking its services to segments such as

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marginal farmers micro enterprises and self-employed customers. To serve these segments the
Bank has designed products across the spectrum of savings assets and payments.

IDFC Mutual Fund was established in 2000 and is one of the largest Mutual Fund houses in
India’s domestic market. In terms of Assets under Management or AUM, it is one of the 5 largest
players in the sector. Over the years, the corporation has grown to cover most of the domestic
market and has several regional headquarters across the Central and Eastern parts of the country,
where economic growth is higher and more investment options are needed.
Despite being a relative newcomer, IDFC Mutual Fund has managed to shake up the domestic
financial system. It has been the recipient of numerous awards and recognitions from the Mutual
Funds statutory bodies and from industry leaders in media and management.

IDFC Mutual Funds have more than Rs. 69,334 Crore as Assets Under Management as of
December 2018, making it one of the largest players in the Mutual Funds industry.
Managed by the IDFC AMC Trustee Company Private Limited, IDFC Mutual Fund currently
has over 250 Mutual Funds in the market that are divested across various segments – from Gilt
Funds to Fund of Funds and Children’s Funds.

In 2000, the Reserve Bank of India [] IDFC Ltd. to transfer its shareholding to IDFC Financial
Holding Company Limited from IDFC’s Asset Management Company in keeping with banking
norms. IDFC Ltd. continues to function as the largest shareholder in its Assets Management
Company and the Mutual Funds business.

The parent organization of IDFC Mutual Funds, IDFC Ltd., was established by the Central
Government to fast-track the growth of private businesses in India. IDFC Ltd. also operates
IDFC Bank.

IDFC Ltd. specialises in Financing, Principal Restructuring, Investment Banking, Brokerage,

Assets Management and Advisory Services, and Project Financing. Its Asset Management
operations include:

I. Investments via IDFC Alternatives Ltd., which specialises in private and project equity
investments.

II. IDFC Assets Management Company or AMC which manages public markets asset
management.

Auditors of IDFC Mutual Funds include the likes of Deloitte Haskins and Sells. The custodian of
IDFC MF is Deutsche Bank Limited AG. IDFC Mutual Funds include of NAVs and AUMs, and
have many options for first-time, experienced, retail and corporate investor’s et al.

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Top Asset Management Companies In India

% Change (Q-

Mutual Funds AUM (Cr) Q)

ICICI Prudential Mutual Fund 2,93,338 5.11

HDFC Mutual Fund 2,89,168 7.19

Reliance Mutual Fund 2,43,594 5.26

Aditya Birla Sun Life Mutual Fund 2,41,107 7.33

SBI Mutual Fund 2,05,273 9.17

UTI Mutual Fund 1,53,364 1.79

Kotak Mahindra Mutual Fund 1,19800 8.29

Franklin Templeton Mutual Fund 99,804 5.34

DSP Mutual Fund 86,255 10.84

IDFC Mutual Fund 71,388 7.58

SWOT Analysis

Strength of Indian AMCs Industry

The opening of Indian asset management industry to private players a little over 20 years have
proved to be a blessing. The objective was to expand the business by broadening and deepening
the market for asset management products. The inclusion of asset management products in the
basket of traditional investment avenues like, cash-in-hand, corporate and fixed deposits (FDs),
savings accounts, stocks and gold have provided investors with another important investment

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alternative. The favourable regulatory regime which is playing a crucial role in providing steam to
the mutual fund industry. The regulatory framework has maintained pace with the changing
environment which in turn has assisted the AuM of the asset management companies to grew
from 470 billion INR in 1993 to 1396 billion INR in 2004 and to 8252 billion INR in 2014
(please refer exhibit 4) The asset management industry provide a rich diversity in the shape of
mix of traditional mutual fund products and alternatives (real estate and hedge funds). It enjoys a
broad investor base as it encompasses insurance funds, pension funds, sovereign wealth funds
(SWFs) and high net worth individuals (HNWIs) / mass / affluent / retail investors. Next going by
the global trends in 2012, the global aggregate AuM with asset managers stood at 64 trillion USD.
This broadly consisted of mutual fund assets (27 trillion USD), mandated AuM (i.e. asset
allocations from global pension funds, insurance industry, SWFs etc. for the management /
advisory services of asset managers; 30.4 trillion USD) and alternative investments (6.4 trillion
USD). The global AuM is expected to surpass 100 trillion USD by 2020. Significant growth is
estimated in mandated AuM as well as alternative investments. So in this expected mammoth
growth of AuM, India is definitely going to receive a substantial pie.

Weakness of Indian AMCs Industry

The asset management industry held 39.5 million folios as on 31st March 2014, which has
moved southwards from approximately 47.6 million as on 31st March 2009. In the following
years also there has not been a discernible change in statistical trends as yet. The industry AuM
from towns other than in the top 15 cities was nearly 871.4 billion INR as on 31st March 2012
and was nearly 1126.5 billion INR as on 31st March 2014 (reflecting a CAGR of approximately
13.7%). This translates into 14.84% and 13.65% of industry AuM in the respective years. No
doubt, it is true that there are investible surpluses available in cities beyond top 15, at least more
than what has been tapped by the asset management industry so far. It has been observed that
share of AuM from the top metros has remained relatively high in comparison to Tier 2 and 3
towns. The industry also witnesses shortcomings in its product basket. Over the years the
industry has developed an extensive product basket covering various investment opportunities.
However, the 80-20 rule applies. More than 80% of the AuM is in less than 20% of the product
categories. The industry has been operating on what we know as the ‘open architecture’
distribution model, with no tied agents. Although the ability to invest directly now exists, the
industry is hugely dependent on the distributor fraternity at the front end. Over the years, the
distribution economics have been changed to correct a few glitches such as churn, etc. However,
as things stand, the number of AMFI registration numbers (ARNs) has gone down from nearly
82,015 as on 31st March 2011 to 58,167 as on December 2013. The industry needs to analyze
this trend in all aspects. Unfortunately, there may not be a ‘onesize-fits-all’ solution that will
work.

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Opportunities for Indian AMCs Industry

The opportunities may knock the doors of the Indian mutual fund industry if it espouses an
‘outside-in’ perspective as compared to ‘inside-out’ perspective. Understanding investors’ needs
should be followed by a product channel alignment. If it focuses upon catalysts such as
technology, investment in B-15 cities, investment advisor etc. then it can ensure the
accomplishment of overall objective of prudent growth and profitability. It needs to work
towards enhancing financial literacy, as it can act as a key to unlock the doors to B-15 cities and
also to remove the outlook that equates mutual fund to only equity. By conducting investor
awareness campaigns in smaller cities, it can assist asset management companies to increase the
AuM in smaller cities which would assist industry to progress in a holistic manner. Fund houses
by partnering with the correct distributor can make their products available to investors in
smaller towns. In this regard, Banks and IFAs could play a crucial role in reaching the investor
base. Also, distributors needs to incentivised enough to make sure that they project mutual funds
as a long-term investment for attaining financial goals. Asset Management Companies should
make optimum utilization of technology in future, as it may go a long way in accessing investors
at a low cost and in a more efficient manner. AMCs need to make the pertinent investments in
technology to help reach investors to help ensure transactions on the channels of their choice.

Based upon a research report by NOVONOUS (The key findings of Mutual Funds Market 2015-
2020), the asset management companies can explore opportunities in the following segments:

a) Equity based mutual funds market in India is expected to grow at a CAGR of 11%.

b) Debt based mutual funds market in India is expected to grow at a CAGR of 17%.

c) Liquid/money market based mutual funds in India is expected to grow at a CAGR of 16%.

d) ELSS-equity based mutual funds market in India is estimated to grow at a CAGR of 15%.

e) Balanced scheme based mutual funds market in India is estimated to grow at a CAGR of 10%.
f) Gold ETF, Gilt, Other ETF’s based mutual funds market in India is expected to grow at a
CAGR of 15%.

Threats for Indian AMC Industry

The decision of the capital market regulator, Securities and Exchange Board of India to increase
the minimum net worth requirement for asset management companies (AMCs) from INR 10
crore to INR 50 crore is expected to change the face of the mutual fund industry radically. The
objective is to ensure that mutual funds attain a reasonable size and play a significant role in
accomplishing the objective of financial inclusion while further strengthening transparency to
assist investors in taking informed decisions. Another blow for small players can be the decision
of SEBI, wherein it encourages merger and consolidation of equity fund schemes. According to

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SEBI, similar to merger / consolidation of companies, the merger / consolidation of equity
mutual fund schemes also may not be treated as transfer, and, therefore, may be exempted from
capital gains taxation. This will effectively bring down the entry of new players and thereby de-
clutter multiple offerings. Going by this approach, a mutual fund investor will have to look at
lesser number of mutual funds before short-listing where to invest. Further, AMCs which are
under- capitalized as of date, their shareholders needs to be convinced that there is a business
case to enhance the capital base, considering the returns they would expect given this infusion.
Now, these shareholders would potentially look at local partners / overseas partners, as the case
may be, to enhance their capital and bring in a new player. This may prove to be a challenging
task given that a third shareholder will have to be convinced about the future of the AMCs’
profitability. Another bigger threat is in the shape of Ponzi schemes and other unregulated
parallel market investment schemes that are affecting the growth of mutual fund sector. A Ponzi
scheme is a fraudulent investment operation that pays returns to its investors from own money or
money paid by subsequent investors, rather than from profit earned by the individual or
organization running the organization. While expenses chargeable by MFs and the promises they
can make are highly regulated by the Securities and Exchange Board of India (SEBI), illegal
schemes that stay out of the regulatory ambit follow none of these. MF agents, who earn much
less than those of illegal schemes, are left with the burden of pitching a regulated product that
comes with huge disclaimers on market risks against schemes claiming fanciful returns. While
SEBI has been formulating regulations for regulated MFs, it has not been able to rein in illegal
schemes effectively. Another significant peril to mutual fund industry is the presence of parallel
economy, which has acted as an impediment in penetrating market for asset management
companies. On the contrary in developed markets, where the magnitude of black money is less
experience higher market penetration. For instance, South Korea, which is smaller than Uttar
Pradesh of India, has a MF market twice the size of India.

Regulatory Framework

A robust and favourable regulatory framework is a sina-qua-non for the growth and development
of Indian mutual fund industry. In this regard, the industry regulator, Securities and Exchange
Board of India (SEBI) has focused more on investor protection, introducing numerous
regulations to empower retail investors in Mutual Funds (MFs). The regulatory approach by
SEBI commenced with prohibition of charging of initial issue expenses, which were allowed for
closed-ended schemes, and mandating that such MF schemes shall recover sales and distribution
expenses through entry load only. These moves aimed at bringing in more transparency in fees
paid by investors and helping make informed decisions. Subsequently, August 1st, 2009, SEBI
banned the entry load that was deducted from the invested amount, and instead permitted
customers the right to negotiate and decide commissions directly with distributors based on
investors’ assessment of different factors and related services to be rendered. The objective was to
bring in more transparency in commissions and engender long-term investment. Though the
intent of amendment was to benefit the investor, it has affected the margins of AMCs. Further,

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SEBI has scrapped the additional management fee of 1% charged by AMCs on schemes
launched on a no load basis resulting into further squeeze in margins earned by the AMC.
Another significant development on the anvil, Direct Tax Code (DTC), taxability of income from
mutual funds, at the hands of investors will also have a bearing on the growth of the mutual
funds industry. Unlike the existing tax provisions, DTC does not provide for any benefit for
investment in equity linked savings scheme, and also proposes to enhance the compliance in the
hands of MFs by broadening the scope of deduction of tax to include payments made to
residents. The code has also created inconsistency on the taxability of the MF investors. It is
unclear whether the income earned will be exempt or taxed in the hands of the investors on
accrual basis, as mentioned in the Discussion Paper on the DTC. The capital market regulator,
SEBI, had formed the “Committee on Review of Eligibility Norms” (CORE) to revisit the
eligibility rules and other functional angles prescribed for various intermediaries. Amongst other
recommendations, the important ones are pertaining to increase in the minimum net worth of
AMCs from INR 10 crores to INR 50 crores, change in the definition of net worth, sponsor to be a
regulated entity and change in definition of control. The objective of the mentioned
recommendations was to permit only the serious players to enter / remain in the market. This can
go a long way in better governance of MF players. SEBI has also permitted trading of MF units
on recognized stock exchanges. Subsequently, BSE and NSE have launched trading platforms
assisting investors to invest by availing services of stock brokers. While trading through the
stock exchange, the investor would get to know about the validity of his order and the value at
which the units would get credited / redeemed to his account by the end of the day. Whereas,
while investing through MF distributor or directly with the MF, the investor receives information
of the subscription and redemption details only in the shape of direct communication from the
MF/AMC. Therefore, by trading through stock exchange, the investor would be able to optimize
his investment decisions due to the reduced time lag in the movement of funds. This
transparency in ascertaining the status of order till completion assist in bringing down disputes.
Further, the investor would able to get a single view of his portfolio across multiple assets, like,
MF units etc.

Sustainability of Mutual Funds / Asset Management Companies

It is imperative to understand both for an existing and potential investor regarding the
sustainability of the asset management companies where the money have been invested. Since as
a practice one generally focuses upon Net Asset Values across various schemes and return on
portfolio, but it is equally rather more important to ascertain the solvency of the mutual fund or
asset management companies who are managing gargantuan funds. In view of this, the three
major asset management companies that have been considered for the study due to their public
information availability, i.e. Birla Sunlife Asset Management Co. Ltd.; HDFC Asset
Management Co. Ltd. and UTI Asset Management Company Limited.

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In order to judge the sustainability of the aforesaid asset management companies, the past data’s
are to be taken as base to estimate the future sustainability of the asset management companies.
The period considered for the study is 2016-2021.

Birla Sunlife Asset Management Co. Ltd.

Comparative Revenue Analysis

Year Growth rate
2016 27.03%
2017 30.76%
2018 30.48%
2019 6.31%
2020 -12.26%
2021 -2.34%

HDFC Asset Management Co. Ltd

Year Growth Rate
2016 40.41%
2017 6.26%
2018 17.75%
2019 12.14%
2020 2.22%
2021 2.72%

UTI Asset Management. Ltd.

Year Growth Rate
2016 14.86%
2017 26.57%
2018 22%
2019 -6.62%
2020 -17.66%
2021 34.68%

Please refer Appendix 2, 3 & 4 for detailed calculations for Birla Sun life Asset Management Co.
Ltd.; HDFC Asset Management Co. Ltd. and UTI Asset Management. Ltd. respectively.

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 Chart Title
50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2016 2017 2018 2019 2020 2021

-10.00%

-20.00%

-30.00%

Birla Sunlife Assest Management Co.Ltd HDFC Asset Management Co. Ltd UTI Asset Management. LTd

Data Analysis or Findings

First analyzing the impact of global economic crisis on mutual fund industry, especially on the
profit after tax of three asset management companies considered for the study, it can be said that
the impact was not of higher magnitude. However, it overall affected the Financial Services
sector of Indian economy. Next coming to judging the sustainability of asset management
companies, the parameter used is ‘Comparative Revenue Analysis’, as growth signifies a
business optimism and sustainable operations. In this regard, from the analysis of financial data of
three asset management companies, viz; Birla Sunlife Asset Management Company Limited;
HDFC Asset Management Company Limited and UTI Asset Management Company Limited, it
can be observed that in 2016 and 2021, HDFC Asset Management Company Limited witnessed
positive rate in 2016. However, On 9 November 2016, crashed by 1689 points, believed by
analysts to be due to the crack down on black money by the Indian government, resulting in
frantic selling. The Sensex nosedived by 6% to 26,902 and the Nifty dropped by 541 points to
8002. These were said to be due to the demonetization drive by the Modi government. The
Hindu was of the opinion that the weakening rupee and the US presidential election too had
some bearing on the behavior of investors. The fall was concurrent with falls in other Asian

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stock markets including the Hang Seng, Nikkei and the Shanghai Composite. The S&P had also
fallen by 4.45%, the scenario improved from 2018 and its expected rate of growth forayed into
positive territory. In case of Birla Sunlife Asset Management Company Limited and UTI Asset
Management Limited their Growth rate have entered negative zone in the year 2020 due to
covid-19 pandemic. But overall the performance of all the three asset management companies
appears to be satisfactory and their growth rate is expected to be rising given the positive
business environment in India.

Way Forward

The Indian mutual fund industry is witnessing a metamorphosis. On one side it has witnessed
numerous regulatory development while on the other hand, the overall economy is recouping
from the aftermath of Global Economic crisis and Eurozone crisis. But the silver lining is that
India is undoubtedly emerging as the next big investment destination, riding on high savings and
investment rate, as compared to other Asian economies. As per report authored by PwC, “The
World in 2050”, the average real GDP growth in India was likely to be in the range of 5.8%
between 2007-50 (the actual average GDP growth between 2007-10 has been 7.6%) with per
capita income rising to USD 20,000 from the current USD 2,932. More than 50 percent of the
population is below 25 years of age, with the proportion of working population likely to move up
over the next decade. The trend of increasing personal incomes has been observed not only
amongst the young population, but also high net worth (HNI) segment, which have sizeable sum
to invest. One estimate reveals that there are more than 120,000 dollar millionaires in India and
the number is growing. The household segment therefore offers huge scope for enticing
investments. India has a robust middle class of 250-300 million, which is estimated to double
over the next two decades. It is in the backdrop of some of these statistics that Indian mutual
fund industry has fostered itself. In current volatile market environment, mutual funds are
considered as transparent and low cost investment vehicle, which lures a fair share of investor
attention helping spur the growth of the industry. Over time, inclusive growth across the
financial sector, seems to have occupied center-stage, re-designing all business strategies around
this sole objective. The mutual fund industry being no exception, various initiatives are being
initiated by fund houses and distributors to spread access and reach to semi-urban and rural
segments.

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 Chapter 5: Conclusion and Suggestions

The underflow of changes in the Indian economy in the post-pandemic world has made one thing
abundantly clear – that the India growth story isn’t going to lose its charm any time soon: rather it
has all the makings of a magnum opus. As the country is expected to clock a double digit
growth in 2021 which is significantly better than what experts had predicted when the outbreak of
the coronavirus pandemic wreaked havoc on the global economy last year, investment patterns are
bound to witness a paradigm shift.

Change is the only constant and what with the recent pandemic having thrown lives out of gear,
the impact on various industries in India has been varied but what is common is that it has
heralded an era of transformation for all of them. Dangi describes, “India is so under capacitated
that anything that you think of there is opportunity almost everywhere. From a macro framework
standpoint, I think, India is likely to witness a massive growth in sectors like home building or
other construction businesses. .. Logistics, supply chain will also do very well. That is in my
view at this stage of development is pivotal to us achieving a reasonable growth. We are not a
frontier economy. We are a relatively low to middle income economy and we must ensure that
capital which is extremely scarce that should be deployed in areas where we have low hanging
fruits because if you put lot of capital in the frontier economy you will get only 2 percent growth
but we can easily achieve as China has been able to demonstrate 7-9 percent growth.
Construction is an area- per capita constructed area in India is super low and therefore associated
industries such as steel, cement will do very well.”

Dangi adds, “I think we are not far behind from most developed countries in terms of digital
infrastructure and it is relative to our developmental markers. From an industries point of view,
that business will continue to do well. Our stature as office of the world and pharmacy of the
world will do well and grow in next 10-15 years.”

But the future path for many industries which are witnessing an unprecedented level of
disruption may make things challenging. “What will not do well – some of the industries that
will get disrupted because of the advent of new technologies – for instance finance, education,
brick and mortar healthcare the way we see them, energy – carbon-based and oil-based industries
could struggle. Those in ICE (internal combustion engine) businesses would struggle as I would
imagine that by 2040-2050 there would be no ICE vehicles on Indian roads.” For the auto
industry players Dangi feels it is too early to predict which of them would become formidable
manufacturers of Electric Vehicles and what with EV businesses being very different from ICE, it
isn’t pre-ordained as to who would succeed.

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Dangi is of the conviction that the stage is set for India to grow at 7-8 percent for the next ten
years. “7-8 percent will mean 11-12 percent nominal growth. Typically, such strong economy is a
reasonable condition for stock markets to do very well and typically equities tend to do well in
settings such as these where the economy is expanding rapidly.”

However, it is upto the investors to gauge their level of risk-taking abilities. “Investors would
know there are inherent risks to allocating capital in equities as they tend to be more volatile,
more drawdown all of a sudden that you as of today cannot surmise. Risk allocation to equity vs
fixed income vs real estate has to be taken care of and there is no big picture number I can give to
anyone. Everyone has to determine what his /her risk appetite is. But undoubtedly it is the best to
participate in India’s growth story by investing in equity markets.”

Buying real estate and allocating monetary resources towards fixed income funds is also
beneficial, he explains. “We have a lot of young people in the country who will continue earning a
steady stream of income over the next few years. They should look at 5-7 percent real return on
their portfolio which is inflation plus 5-7 percent. Everyone must buy a house because real estate
is cheap now and interest rates are too cheap and it will take care of your inflation and will earn
better than fixed income and vis-a-vis fixed income funds and it’s a good collateral also. For
your regular needs, you should have some fixed income funds which will earn you 1-2 percent.”

The digital revolution has also led to a drastic shift in the way retail investors participate in the
markets. One tap of a button is the gateway to the financial world and according to Dangi this
has engendered a culture where more and more people are embracing equity as a legitimate asset
class.
Dangi quips, “This is part of general evolution of every economy – as the country gets rich, a
substantial part of the population starts looking for opportunities that are beyond routine and the
routine is fixed deposit, fixed income funds and real estate. Older generation would think of
equities as lottery and which could make some people super rich but most people would lose
money was the general perception. But that’s not true. So this rise in equity culture – it is not a
top down thing with the govt telling people to invest – its bottom up with more people realizing
they have enough savings. Somewhere between 2010 and 2015 India got to a point where we
already had a little bit of a equity cult building. India has had an ecosystem of investing since
long but that’s primarily and ecosystem of H&Is but since last 5-6 years relatively middle
income demographic also participating through SIPs which is a great idea of investing slowly
and steadily so that wrinkles in the market can be gotten over with.”

Typically many investors still harbour cynical sentiments about equity investments because of
the volatility factor. Dangi assures that for long-term investments, investors have nothing to fear
from market fluctuations. “There is no volatility in equity if you are investing for 5-10 years. I

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think a very large part of your allocation you should bet on equities. It is inappropriate to talk of
specific opportunities in market because I want people to be aware that these themes keep
changing. I am very confident that Indian equities will do very well over all. It is best to allocate
money in funds which invest in all sorts of things – that’s a better approach for the audience. For a
broader audience, the opportunity is for you to participate in the India growth story by betting on
Indian markets.”

Asset management companies manage huge amounts of money gathered from investors through
multiple schemes and help invest in equity, mutual funds, real estate, etc. with the intent of
providing a good return on investment to its investors. Investors thus, place their trust in the
company and the fund manager who will be handling their hard-earned money. Investing in the
above-mentioned top 10 AMCs and their acclaimed Mutual Funds respectively, will help in your
savings and generating wealth over time.

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