A Study to Analysis: EDELWEISS MUTUAL FUND

Abstract:
In this case study we are going to understand more about mutual fund & have a view on
India’s largest asset management company Edelweiss mutual fund.
First of all what is mutual fund
1. Introduction:

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

1.1 First Phase of Mutual Fund: (1964-1987)

ESTABLISHMENT

The beginning of the history of mutual funds in India is marked by the establishment of the
Unit Trust of India in 1963. UTI dominated the entire phase and, in 1964, introduced its
flagship scheme, which grabbed the attention of the public for its safety and assured returns.

1.2 Second Phase of Mutual Fund: (1987-1993)

ENTRY OF PUBLIC FUND

In the second phase, the public sector banks, along with various financial institutions, took entry into
the mutual fund market. SBI Mutual Fund, which was established in 1987, stands as the first non-UTI
mutual fund in the history of mutual funds in India.

1.3 Third Phase of Mutual Fund: (1993-2003)

ENTRY OF PRIVATE FUND

Entry of Private Sector Mutual Funds. The Indian securities market gained greater importance with
the establishment of SEBI in April 1992 to protect the interests of the investors in securities market
and to promote the development of, and to regulate, the securities market.

1.4 Fourth Phase of Mutual Fund: (2003-2014)

INTRO OF NFO

In the year 2003, UTI was split into two different organizations after the UTI Act of 1963. The two
organizations were UTI mutual funds and were registered under SEBI. The introduction of the New
Fund Offer (NFO) process and consolidation of different schemes of mutual funds assist in
streamlining the industry and enhancing the experience of the investors.

1.5 Fifth Phase of Mutual Fund: (Since 2014)

INFLOW AND OUTFLOW

Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as well as the
number of investor folios (accounts).

1.6 Parties Involved in Mutual Funds

SEBI It is the governing authority of stock market. Mutual funds legal framework is
regulated by SEBIs guidelines
Investor Investor is another speculator (who takes on high risks for high rewards) but one
whose primary objective are to safeguard the principle investment, a steady
income and capital appreciation.
Trustees The mutual fund has been formed as a public trust and trustees manage the trust.
They are primarily accountable for protecting the interest of mutual fund
investors.
Assets SEBI approved asset management company manage the fund by making
Managemen investment in various types of securities. It manages the investment portfolios o
t Company the schemes and handles various other routine activities incidental to the mutual
fund business. Its income comes from the management fees it charges for
schemes it manages
Distributors They earn commission for bringing in investors into the schemes of mutual fund.
This commission is an expense for the schemes
Registers An investor holding in mutual fund schemes is typically followed by the schemes
RTA (Registrar and transfer Agent). Some AMC‟s prefer to handle it in house.
Custodian/ As the name suggests, a custodian of the securities preserves the custody of the
Depository securities in which the scheme invests. Therefore, for an investment transaction of
mutual fund, custodian receives or gives delivery.

Chapter 2 THEORATICAL FRAMEWORK

2.1 Asset Management Company

There are 44 asset management companies (AMCs) or mutual fund houses operating in India. These
companies manage the investments of investors to fetch them optimal returns. Below we have
provided a list of top 15 mutual fund houses in India.

1 HDFC Mutual Fund

2 Aditya Birla SunLife
3 Axis Mutual Fund
4 SBI Contra Fund
5 ICICI Prudential
6 DSP MF
7 UTI Asset Management Company
8 Canara Robeco MF
9 Franklin Templeton MF
10 Kotak Mahindra Asset Management Company Limited
11 Reliance Nippon
12 Edelweiss Asset Management Limited
13 Baroda Mutual Fund
14 ICICI Mutual fund
15 Nippon Life India Assets Management Ltd

3.2 Mutual Funds

A mutual fund is an investment fund that pools money from many investors to purchase
securities. The term is typically used in the United States, Canada, and India, while similar
structures across the globe include the SICAV in Europe, and the open-ended investment
company in the UK.

Mutual funds offer professional investment management and potential diversification. They also
offer three ways to earn money: Dividend Payments. A fund may earn income from dividends on
stock or interest on bonds. The fund then pays the shareholders nearly all the income, less
expenses.

Some Key Features of a Mutual Fund are as Follows

 Professional Management

Each fund‟s investments are chosen and monitored by qualified professionals who use this
money to create a portfolio. That portfolio could consist of stocks, bonds, money market
instruments or a combination of all of these.

 Fund Ownership

An investor owns shares of mutual fund, not the individual secures. Mutual funds permit the
investors to invest small amounts of money. The pool can be used to buy even those securities
14 which would have been out of reach of a common individual investor. Thus investors in
mutual funds benefit from being involved in a large pool of cash invested by other people.

 Diversified Investment

Mutual funds have a diversified investment portfolio which helps in minimizing the risk as the
fluctuation in prices of the individual securities has less effect on the fund’s performance.

3.3 Benefits of Mutual Funds

 Risk Diversification

Mutual funds help to diversify the risk associated with the securities, because overall risk of the
particular mutual fund is proportionately divided among all the unit holders of mutual fund.

 Operated by Professional Manager

Mutual funds are kept and operated by the professional managers who are professional in this
particular field so the unit holders enjoy the professional Operation on these mutual funds.

 Passive Investment Style

Mutual fund is a passive investment style in which the owners of the unit holders do not participate
directly but they keep these units passively. They don’t need to participate directly they only have to
purchase the units and keep them in passive way.

3.4 Classification of Mutual Funds

Based on Maturity Period

 Open-Ended Funds:

An open-ended fund is a fund that is available for subscription and can be redeemed on a
continuous basis. It is available for subscription throughout the year and investors can buy and
sell units at NET ASSET VALUE (NAV) related prices. These funds do not have a fixed maturity
date. The key feature of an open-ended fund is liquidity.

 Close-Ended Funds:

A close ended fund is a fund that has a defined maturity period, for example 5-7 Years. These
funds are open for subscription for a specified period at the time of initial launch. These funds
are listed with a recognized stock exchange.

 Exchange Traded Funds:

Exchange traded funds combine the features of open-ended and close-ended funds. These funds
may trade on stock exchanges and are open for sale or redemption at predetermined intervals
on the prevailing NET ASSET VALUE (NAV).

 Unit Investment Trusts:

UTIs are also issued to the public only once when they are created. They have a fixed maturity
period and a fixed portfolio of securities which is determined at the time of creation.