Prudential Icici Mutual Fund

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PRUDENTIAL ICICI MUTUAL  FUND

 Definition:

A MF is a pool of money, collected from investors ,& is invested   according to certain Investment Options  Characteristics of a MF :

1) Ownership of MF belongs to investors 2) MF is managed by investment professionals who earn a fee  for their services from the fund 3) Pool of funds is invested in a portfolio of marketable  investments. Value of portfolio is updated every day

Why Mutual Funds ◆

To address problems faced by retail investors; ◆

Lack of money to obtain spread



Lack of personal expertise



Lack of time to manage investments

Structure of MFs  Governed by SEBI (Mutual Fund) Regulations, 1996  Mandatory for MFs to have a three tier structure

Sponsor

Trustee

Asset Management Company

Sponsor: Promoter of the MF, appoints the Trustees Trustees:Responsible to the Investors in the MF,appoints AMC AMC : Business face of MF, manages affairs of MF

How Mutual Funds Work  Money Pooled from Investors Unit Trust Fund/ Mutual Fund Trust Deed

Trustee*A Professional Fund  Manager

Portfolio of Authorised Investments − − − − − −

A: Custodian/Depository

Shares Government Securities Bonds Property Liquid Assets Derivatives

Mutual Funds: Advantages  Lower transaction costs due to economies of scale  Tax benefit compared to most other investment options in India  Professional fund management  Diversification  Systematic Investment Plans  Regular Savings Plans

Mutual  Funds ­ Types Open­ended:  Investors can buy /sell units of fund,at NAV related prices,at 

any time directly from the fund.

 These funds are offered for sale at a pre­specified price,say 

Rs. 10 ,in the initial offer period. After a pre­specified period,  say 30 days,the fund is declared opened for further sales &  repurchases

 Pool of funds & units vary everyday Close­ended:

 Open for sale to investors for a specified period ,after which 

further sales are closed. Any further transaction happens in  the secondary market where closed end funds are listed

 Pool of Funds technically constant

Advantages of Mutual Funds  Suit small or large investors.  Flexibility ­ option to have Income Reinvested.  Professional Fund Management.  Cheaper dealing than for individual.  Liquidity – ease of purchase and sale of holdings  Diversification – spread of risk.  Access to international markets  Tax benefits in some jurisdictions.  Regulated ­ investor protection.  Wide spectrum of fund choice – 50,000 funds worldwide.

Investment Pyramid: India

Reward

Equity Funds

Income Funds Short term funds Floating rate Funds ◆

Liquid Funds Risk

Investment objective Reward

Each fund : Stated Investment Objective − Income / Growth − Markets(s)

Emerging Markets ◆ Derivatives ◆

Europe / USA ◆ Smaller Cos.

Europe / USA ◆ Blue Chips ◆ Global Government Securities ◆ Money Markets ◆

Risk

Applications of Mutual Funds ◆

Any medium to long-term investment i.e. >3 years



Investment Abroad ➘ exposure to overseas markets - appeals to both sophisticated and unsophisticated investors



Retirement Income ➘ Invest while employed - take income in retirement / use capital as safety net.

Applications of Mutual Funds ◆

Achievement of long-term goals ➘ Housing ➘ Education



Investment for children ➘ Parents / Grandparents set up investment account on behalf of children / grandchildren.



Unit-Linked Life Assurance Products.

Authorisation process        

Submit : Trust deed (Unit Trust) Instrument of Incorporation (Investment Company) Prospectus (or equivalent) Marketing Plan Evidence of financial standing Submission Fee Formal request

Regulatory Authority Securities Exchange Board of India

Offer Document  MFs are required to file with a SEBI the Offer Document/Prospectus, in a prescribed format that provides all information about the fund &  the scheme Legal Document in language of country Purpose Provide Investors with key information needed to make informed decisions Details of launch     e.g. 

− −

 

length of initial offer period what will happen if launch targets not reached.

Offer Document / Prospectus  Constitution of the fund,details of sponsor, trustee & AMC  Standard & Specific risk factors

 Scheme attributes ­Investment objective,pattern,terms with 

regards to liquidity  Details of the scheme being offered  Loads, fee structures & expenses  Unit holder rights

Key Information Memorandum  As the Offer document is very detailed, SEBI allows 

MFs to summarize the key points in a summary  document called as the Key Information Memorandum  (KIM)  It is mandatory that the KIM is made available to all  investors alongwith the application forms

Launching a Mutual fund  Initial offer at fixed price  Press announcements / Mailings to potential investors 

­ must conform to regulatory standards of jurisdiction. 

 Launch briefings to advisers / agents.   Some jurisdictions allow direct selling “off the page”.   Usually, fund holds subscriptions to see how much 

raised before investing.

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