Mutual Fund Essay

714 Words 3 Pages
Mutual funds collect funds from small investors or unit-holders. The funds so collected are invested in buying shares of companies. Thus, MFs; provide funds to companies for business purposes.
(b) They act as indicators between investors and companies. By buying shares in mutual funds, the individual investor becomes part of our institution and so can stand on even terms.
(c) Mutual funds are organized, operated and managed by companies that do the practical administrative things that allow the fund to function, and
(d) They select the fund‟s strategy, hire mangers, market the shares to potential investors and do the paper work.
According to Regulation 2(m), “Mutual Fund means a fund established in the form of a Trust by a sponsor
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Mutual Fund is established as a fund in the form of Trust. ii. It is established by a Sponsor. iii. It is created to raise money through sale of units. iv. It sells one or more schemes and v. The funds raised are invested in securities in accordance with the regulations.
Now, hereafter, the money collected under any scheme of a mutual fund shall be invested only in transferable securities, whether in the money market or in the capital market or in privately placed debentures or secured debts [Regulation 40 (1)].
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Mutual Funds are known by different names in different countries. In the United Kingdom, they are known as “Investment Trusts” while in the USA and most of the other countries they are called “Investment Companies”. The flow chart below describes broadly the working of a mutual fund. Mutual Fund Operation Flow Chart
6.2 MUTUAL FUNDS INDUSTRY - AN INDIAN
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In 1964, the board of trustees formulated an openended scheme and launched it with scale of units begin open in the month of July, 1964 at the nominal value of Rs. 10 each. Thus, the UTI came out with its first open-ended scheme in 1964. During the initial phase of the developments of mutual funds between 1964 and 1987, UTI alone managed the show with five open-ended funds.
The first decade of UTI operations (1964-74) was the formative stage. It introduced UnitLinked Insurance plan (ULIP) in 1971. The period 1974-84 witnessed a state of consolidation and expansion of the UTI. During the period 1984-1987, the Trust launched several new schemes such as Children‟s Gift Growth Fund (1986) and Master Share (1987). The first Indian offshore was brought out. UTI had Rs. 6700 crore of assets under management in 1987-88.
Phase II

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