Mutual Funds

.Your investment is pooled along with others investments
.Diversified professionally managed Portfolio of securities
.Benefits derived as those of an institutional investor
.Risk diversification-investing in a pool of funds comprising of 50-60 stocks of various sectors
.Tax Benefits

Mutual Funds are the only investment options that give you market related , realistic returns through proper diversification of risk by inveting in debt and equity instruments . They also give transparency in transaction anytime liquidity and tax – efficiency . We offer you a range of over two Equity funds , Debit funds and L.iquid funds

Open - Ended Schemes

These do not have a fixed maturity. You deal directly with the Mutual Fund for your investments and redemption's. The key feature is liquidity. You can conveniently buy and sell your units at net asset value ("NAV") related prices.


Close-Ended Schemes

Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close-ended schemes. You can invest directly in the scheme at the time of the initial issue and thereafter you can buy or sell the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchange could vary from the scheme's NAV on account of demand and supply situation, unit holders' expectations and other market factors. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but closer to maturity, the discount narrows.

Some close-ended schemes give you an additional option of selling your units directly to the Mutual Fund through periodic repurchase at NAV related prices SEBI regulations ensure that at least one of the two exit routes are provided to the investor.

What is the difference between an open ended and close ended scheme?

Open ended funds can issue and redeem units any time during the life of the scheme while close ended funds can not issue new units except in case of bonus or rights issue. Hence, unit capital of open ended funds can fluctuate on daily basis while that is not the case for close ended schemes. Other way of explaining the difference is that new investors can join the scheme by directly applying to the mutual fund at applicable net asset value related prices in case of open ended schemes while that is not the case in case of close ended schemes. New investors can buy the units from secondary market only.

Close-ended funds look all set to stage a comeback in the domestic mutual fund industry. We have already witnessed several new fund offers (NFO) over the last 12 months; more are expected to follow. The reason we have used the term `come back' is because close-ended funds were the norm not too long ago; a number of present day schemes were launched as close-ended funds and on maturity became open-ended. However with the advent of open-ended funds which granted greater liquidity to the investors, funds of the close-ended variety slipped into oblivion.

• How to build a mutual fund portfolio
  

  Close-ended funds which are traded in stock markets are another variant. These funds are widely prevalent in developed markets and to a smaller extent in the Indian context. Investors are granted an exit option by listing the fund on the stock markets. The fund has a trading price which is distinct from its net asset value (NAV). In India, funds of this variety (for instance Morgan Stanley) have traditionally traded at a price lower than the NAV (i.e. at a discount to NAV), thereby rubbing investors the wrong way. The trend in global markets is pretty much the same; most closed ended funds trade at a discount to the NAV.

  Should you invest in close-ended funds?
  Close-ended funds can prove to be interesting propositions in the context of both equity and debt-oriented funds. In a debt fund, the fund manager can make investments in line with the fund's tenure and on maturity offer returns with a reasonable degree of certainty. Similarly, equities are known to be the best-performing asset class vis-à-vis peers like gold, property and bonds among others over longer time frames (i.e. over 5 years). However, the key lies in staying invested for the long haul. The fund manager of a close-ended equity fund can make investment decisions with a long-term perspective and be indifferent to short-term occurrences. This is in contrast to open-ended funds wherein the fund's performance is constantly under scrutiny thereby forcing the fund manager to react to near-term events.

  Another area, where close-ended funds score over open-ended funds is liquidity management. In an open-ended fund, the fund manager has to cope with monetary inflows-outflows on a continuous basis. The same could hinder his investments and the fund's performance as well. For example, a fund may witness huge inflows when equity markets soar; in such a scenario the fund manager may not be able to identify enough investment opportunities to allocate money. This could result in a portfolio which is not in sync with what the fund manager actually wants to do. In contrast, a fund manager in a close-ended fund is aware of the corpus at his disposal and also the tenure for which it has been made available to him. The same can grant a degree of stability to the fund management process.

  Close-ended funds can aid investors' cause by granting a defined investment tenure to their investments. The same can help investors in their financial planning process. Investors can provide for their needs/goals by investing in close-ended funds with a matching tenure. This instills a degree of discipline in the investment process because the investor is unlikely to withdraw the money unless there is an urgent need. With open-ended funds, the temptation to do that is very strong.

  In the event of a change in the fundamental attribute of the scheme/fund house investors in close-ended funds have an exit option just like their counterparts in open-ended funds. For example, if the fund house is going to merge into another, investors in close-ended funds have the option of either becoming a part of the new entity or simply liquidating their investments.

  On the flipside, investing in a close-ended fund entails necessarily participating in an NFO every time. As a result investors have no track record or performance history for evaluating the fund. Ideally a fund's performance across a market cycle (bull run and bear phase) and on parameters like Standard Deviation and Sharpe Ratio should be evaluated before making an investment decision. Instead while investing in an NFO, investors have to rely on the fund house and its investment practices/processes for making the investment decision.

  Critics argue that the fund house's motivation while managing a close-ended fund is put to test. Having garnered all the monies the fund could during the NFO stage, even a superlative performance by the fund can't help the fund house augment its assets under management by way of fresh inflows. We believe such an argument doesn't hold good. If a fund house was to behave in the said manner, its impact would be evident in the corpus accumulated by the fund house in its future offerings.

  How to invest in close-ended funds?
  Firstly, investors must be comfortable with the illiquidity associated with a close-ended fund. Hence only that portion of the investible surplus which investors can set aside for a longer time frame should be allocated to a close-ended fund.

  With no historical performance or other parameters to evaluate the close-ended fund on, the fund house assumes prime importance. Investors must invest their funds in schemes from solid process-driven fund houses. The fund house needs to have clearly defined investment practices and policies; the same can make the fund's performance largely immune to events like change in fund management.

  Finally, investors must be comfortable with the investment proposition offered by the close-ended fund. Unlike an open-ended fund, where investors have the option of easily liquidating their investments, investors in a close-ended fund are required to live with their investments throughout the fund's tenure

Mutual funds are a significant source of investment in both government and corporate securities. The largest mutual fund in the country is managed by Unit Trust of India (UTI), which was set up by the government in 1964 to encourage small investors to invest in the equity market. UTI has an extensive marketing network of over 35,000 agents spread throughout the country.

Till December 1995 , 25 MFs (excluding UTI) had been registered with SEBI. Of these, nine are in the public sector, 16 in the private sector. Nine private sector MFs and one public sector MF have foreign participation in their asset management companies.

Schemes offered include equity oriented growth schemes, balanced portfolio schemes and income schemes. In April to Dec 1995, MFs (including UTI), raised Rs 16,410 million through 32 new schemes (of which UTI raised Rs 13,070 million through seven new schemes).

In 1995, the RBI permitted private sector institutions to set up Money Market Mutual Funds (MMMFs). They can invest in treasury bills, call and notice money, commercial paper, commercial bills accepted/co-accepted by banks, certificates of deposit and dated government securities having unexpired maturity upto one year.

Today, numerous mutual funds exist, including private and foreign companies. A variety of schemes exist, both open-end and closed-end. All MFs are allowed to apply for firm allotment in public issues. The functioning of mutual funds is regulated by SEBI. SEBI regulations require that all MFs should be established as trusts under the Indian Trusts Act, while the actual fund management activity is conducted from a separate Asset Management Company (AMC). The minimum net worth of an AMC or its affiliate must be Rs. 50 million to act as a manager in any other fund. MFs can be penalized for defaults including non-registration and failure to observe rules set by their AMCs. MFs dealing exclusively with money market instruments have to be registered with the RBI. All other schemes floated by MFs are required to be registered with SEBI.

Mutual Funds Schemes

• Alliance Mutual Fund
• Birla Mutual Fund
• Canbank Mutual Fund
• Cholamandalam Cazenove Mutual Fund
• Dundee Mutual Fund
• DSP Merill Lynch Mutual Fund
• Escorts Mutual Fund
• GIC Mutual Fund
• ITC Thread Needle Mutual Fund
• JM Mutual Fund
• Kotak Mahindra Mutual Fund
• Kothari Pioneer Mutual Fund
• LIC Mutual Fund
• Prudential ICICI Mutual Fund
• SBI Mutual Fund
• Sundaram Mutual Fund
• Sun F & C Mutual Fund
• Templeton Mutual Fund
• Tata Mutual Fund
• Zurich India Mutual Fund

Closed schemes

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