BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
LEGENDS
SEBI: Security Exchange Board Of India NSE: National Stock Exchange MCX: Multi Commodity Exchange RBI: Resere Bank Of India !"#C: !ousing "eelo$ment #inance Cor$oration India ICICI: Industrial Credit Inestment Cor$oration Of India %M#I: %ssociation Of Mutual #und in India %&M: %sset &nder Management &'I: &nit 'rust Of India &S()*: &NI' SC!EME O# +,)* &-I.: &nit -inked Insurance .lan N%/: Net %sset /alue %MC: %sset Management Com$any C%MS: Com$uter %ge Management Serice E-SS: E0uity -inked Saing Schemes '(BI--: 'reasury Bill 1(SEC: 1oernment Securities MMM#s: Money Market Mutual #unds MI.s: Monthly Inestment .lans O'CEI: Oer 'he 'rade Exchange Of India CRI-: Credit Resources International -imited BS"-: Birla Sun -ife "istri2ution Com$any -imited M#s: Mutual #unds
3ousali Institute of Management Studies4 "har5ad +
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
EXECUTIVE SUMMARY
'he $ro6ect title is 7inestment $attern of 2usiness $eo$le8 com$leted in Biral Sun -ife "istri2ution9 'he $ro6ect 5as to study the inestment $attern of the 2usiness men in Mutual #unds9 Biral Sun -ife #inancial Serices offers a range of financial serices for resident Indians and Non Residents Indians9
Mutual #unds are inestment $roducts that o$erate on the $rinci$les of Strength in Num2ers;9 'hey collect money from a large grou$ of inestors4 $ool it together4 and inest it in arious securities in line 5ith their o26ectie9
'he o26ectie of study is to understand the 2ehaior of 2usiness class 5ith res$ect to inestment .attern of 2usiness $eo$le of MI"C
In this regard to I hae collected 2oth $rimary and secondary data9 .rimary data through the 0uestionnaire and interie5 to different ty$es of 2usiness $eo$le in MI"C Bhosari .une9 Secondary data through arious maga>ines4 5e2sites and external ex$erts9
%ccording to the surey conducted on +?? 2usiness men it 5as found that only fe5 inestors had made inestment in mutual funds4 5hile the rest of them had neer looked 2eyond 2ank de$osits and insurance een though their $ercentage of saings is more9 Most of the inestors do not $refer mutual fund9
3ousali Institute of Management Studies4 "har5ad @
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Objectives an Resea!c" Met"##$#%&
Objective
+9 'o understand the 2ehaior $attern of 2usiness class 5ith res$ect to inestments9 @9 'o test the a5ar eness of arious inestment $roducts among the 2usin ess class9 A9 Build relations 5ith the ne5ly interested 2usiness class
Resea!c" Met"##$#%&' C#nc$(sive !esea!c"
'he research undertaken 5as conclusie research as the data needs 5ere clear9 'he research 5as conducted to study a2out the inestment $attern of 2usiness $eo$le9
Sa)*$in% *!#cess P#*($ati#n'+ E$e)ent' the research 5as restricted to 2usiness $eo$le9 E,tent' Bhosari Industrial %rea4 .une
Sa)*$e si-e'
'he total sam$le si>e consists of +?? 2usiness $eo$le9 Sa)*$in% )et"#'+
N#n *!#babi$it&'+
'he 2usiness $eo$le 5ere selected on the 2asis of conenience9
3ousali Institute of Management Studies4 "har5ad A
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Data C#$$ecti#n'+
#or the research $ur$ose the data is collected in the form of .rimary data and Secondary data9
.rimary data is collected in the form of Structured uestionnaire9
Secondary data is collected from arious Boucher;s4 Books4 Maga>ines and e2 sites9
P!i)a!& Data'+
.rimary data is collected through direct interie5s and tele$honic interie5s9 'he data is collected from the 2usiness $erson through 0uestionnaires 5hich 5as $re$ared de$ending u$on the need of study9 %
structured
0uestionnaire 5as $re$ared to collect the data
Sec#na!& Data'+
'he source of secondary data 5ere $u2lished Dournals4 maga>ines4 like inestime and 5e2 sites4 .../a)0i/c#) .../iniain0#$in/c#) .../bi!$as(n$i0e/c#) .../)(t(a$0(ninia/c#) .../va$(e!ese!c"#n$ine/c#)
3ousali Institute of Management Studies4 "har5ad *
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Li)itati#ns'+
Sam$le si>e is ery small as com$ared to the total $o$ulation9
Most of the 2usiness $eo$le don;t fie out the exact inest figures their assets and their finical $lanning
'he method 5hich is a$$lied for the data collection may not 2e right
-ack of kno5ledge in the surey sam$le a2out the mutual funds9
'he result o2tained from the sam$le may not 2e the result of the 5hole $o$ulation9
3ousali Institute of Management Studies4 "har5ad
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Int!#(cti#n t# M(t(a$ F(ns % mutual fund is the ideal inestment ehicle for today;s com$lex F modern financial scenario9 Markets for en0uiry shares 2onds and other fixed income instruments4 real estate4 deriaties and other assets hae 2ecome mature and information drien9 .rice changes in these assets are drien 2y glo2al eents occurr ing in fara5ay $laces9 % ty$ical indiidual is unlikely to hae the kno5ledge4 skills4 incli nation and time to kee$ track of eents4 understand their im$lications and act s$eedily9 %n indiidual also finds it difficult to kee$ track of o5nershi$ of this assets4 inestments4 2rokerage dues F 2ank transactions etc9
% mutual fund is the ans5er to all these situations9 It a$$oints $rofessionally 0ualified and ex$erienced staff that manages each of these functions on a full time 2ases9 'he large $ool of money collected in the fund allo5s it to hire such staff at a eryG lo5 cost to each inestor9 In effect the mutual fund ehicle ex$loits economies of scale in all three areas H research4 inestments4 transaction $rocessing9 hile the conce$t of indiidual coming together to inest the money collectiely is not ne54 the mutual fund th
in its $resent form is a @? century $henomenon9 In fact mutual funds gained $o$ularity only after the Second orld ar9 1lo2ally there are thousands of firms offering tens of thousands of mutual funds 5ith different inestment o26ecties9 'oday mutual funds collectiely manage almost as much as or more money as com$ared to 2anks9
'o get a 2etter understanding of mutual funds it is necessary to kno5 the industry in detail9 In the follo5ing sections a detailed descri$tions of the mutual funds industry 5ill 2e discussed9
3ousali Institute of Management Studies4 "har5ad )
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
C#nce*t #0 a )(t(a$ 0(n
% mutual fund is a common $ool of money into 5hich inestors $lace their contri2utions that are to 2e inested 5ith a stated o26ectie9 'he o5nershi$ of the fund is thus 6oint or mutual and the fund 2elongs to all inestors9 % single inestor;s o5nershi$ of the fund is in the same ratio as the amount of contri2ution made 2y him or 2ears to the total amount of the fund9
Meanin% #0 M(t(a$ F(n
Mutual #unds are inestment $roducts that o$erate on the $rinci$les of Strength in Num2ers;9 'hey collect money from a large grou$ of inestors4 $ool it together4 and inest it in arious securities in line 5ith their o26ectie9 'hey are an alternatie to inesting directly9 % more conenient alternatie yet no less re5arding9 'ake stocks4 trading into the market 2y yourself 5ould mean kno5ing at the ery least4 ho5 to analy>e and track com$anies4 the 5ay of the market and the intermediaries 5ho 5ill hel$ you 2uy and sell shares9 % mutual fund that inests in stocks reliees you of all such hassles4 5hile giing you the same inestment o$tion for indiidual;s handica$$ed 2y a lack of inesting acumen or time4 or generally disci$lined to take charge of their $ersonal finances9
Mutual funds are not magic inestment ehicles that do it all you;ll hae to come to terms 5ith the fact that they assure neither returns nor the alue of yours srcinal inestment9 ou;ll hae to acce$t the reality that een they4 5ho are su$$osedly ex$erts in inestments matter4 can go 5rong9 'hese are inherent risks4 2ut these can 2e managed9 Mutual funds offer seeral adantages that make them a $o5erful and conenient 5ealth creation ehicle 5orthy of yours consideration
3ousali Institute of Management Studies4 "har5ad J
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
C"a!acte!istics #0 a M(t(a$ F(n
% Mutual fund actually 2elongs to the inestors 5ho hae $ooled their funds9 'he o5nershi$ of the mutual funds is in the hands of the inestors9
In case of mutual fund the contri2utors and the 2eneficiaries of the funds are the same class of $eo$le namely the inestors9
Inestment $rofessionals manage a mutual fund and other serice $roiders4 5ho earn a fee for their serices $roided4 from the fund9
'he $ool of funds is inested in a $ortfolio of marketa2le inestments9 'he alue of the $ortfolio is u$dated eery day9
'he inestor;s share in the fund is denominated 2y 7&NI'S89 'he alue of the units changes 5ith the change in the $ortfolio;s alue4 eeryday9 'he alue of one unit of inestment is called as the net asset alue or N%/ 1O2 ARE T1E MUTUAL FUNDS STRUCTURED3
Mutual funds can 2e structured in the follo5ing 5ays: •
Com$any form4 in 5hich inestors hold shares of the mutual fund9 In this structure4 management of the fund is in the hands of an elected 2oard4 5hich in turn a$$oints inestment managers to manage the fund9
•
'rust form4 in 5hich the funds of the inestors are held 2y a trust4 on 2ehalf of the inestors9 'he trust a$$oints inestment managers and monitors their functioning in the interest of inestors9 'he com$any form of organi>ation is ery $o$ular in the &nited States9 In India4
mutual funds are organi>ed as trusts9 'he trust is created 2y s$onsor4 5ho is the actually the entity interested in creating the mutual fund 2usiness9 'he trust is either managed 2y a Board of trustees4 or 2y a trustee com$any4 formed for this $ur$ose9 'he inestor;s
3ousali Institute of Management Studies4 "har5ad K
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
funds are held 2y the trust9
T&*es #0 M(t(a$ F(ns
Open-End Funds
%n o$en(ended fund is one that has unit;s aaila2le foe sale and re$urchase at all times9 %n inestor can 2uy or redeem units from the fund itself at a $rice 2ased on the Net %sset /alue
C$#se+En F(ns
&nlike an o$en(end fund4 the unit ca$ital of a closed(ended fund is fixed4 as it makes a one(time sale of a fixed num2er of units9 Closed(ended funds do not allo5 inestors 2ut or redeem units directly from the funds9 !o5eer4 to $roide the much( needed li0uidity to inestors4 any closed(end funds get themseles listed on stock exchanges9 'rading through a stock exchange ena2les inestors to 2uy or sell units of a closed(end mutual fund from each other9
L#a an N#+L#a F(ns
Marketing of a ne5 mutual fund scheme inoles initial ex$enses9 'hese ex$enses may 2e recoered from the inestors in different 5ays at different times9 'hree usual 5ays in 5hich a fundLs sales ex$enses may recoer from the inestors are: +9 %t the time of ine storLs entry into the fundscheme4 2y deducting a s$ecific amount from his Initial contri2ution4 or @9 By charging the fund scheme 5ith a fixed amount each year 4 during the state d num2er of years4 or
3ousali Institute of Management Studies4 "har5ad ,
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
A9 %t the time of the inestorLs exit from the fundscheme4 2y deducting a s$ecified amount from the redem$tion $roceeds $aya2le to the inestor9
'hese charges made 2y the fund managers to the inestors to coer distri2utionsalesmarketing ex$enses often called loads9 'he load charged to the inestor at the time of his entry into a scheme is called 7front(end or entry load9 'he load amount charged to the scheme oer $eriod of time is called a deferred load9 'he load that the inestor $ays at the time his exit is called a 2ack(end or exit load9 Some funds may also charge different amounts of loads to the inestors4 de$ending u$on ho5 many years the inestor is stayed 5ith the fundG the longer the inestor stays 5ith the fund4 less the amount of8 exit load he charged9 'his is called 7contingent deferred sales charge9
#unds that charge front(end4 2ack(end or deferred loads are called load funds9 #unds that make no such charges or loads for sales ex$enses are called no(load funds9
% load fundLs declared N%/ does not include the loads9 !ence4 a ne5 inestor must add any front(end load amount $er unit the N%/ $er unit to calculate his $urchase $rice9 %n outgoing inestor needs to deduct the amount of any 2ack(end load $er unit from his sale $rice $er unit to get to kno5 the net sale $roceeds he 5ould receie
Ta, E,e)*t an N#n+Ta, E,e)*t F(ns
1enerally4 5hen a fund inests in tax(exem$t securities4 it is called a tax(exem$t fund9 In the &9S9%4 #or exam$le4 munici$al 2onds $ay interest that is tax(free4 5hile interest on cor$orate and other 2onds is taxa2le9 In India4 after the +,,, &nion 1oernment Budget4 all of the diidend income receied from many of the Mutual funds is tax(free in the hands of the inestor9 !o5eer4 funds other than E0uity #unds hae to $ay a distri2ution tax4 2efore
3ousali Institute of Management Studies4 "har5ad +?
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
distri2uting income to inestors9 In other 5ords4 e0uity mutual fund schemes are tax( exem$t inestment aenues4 5hile other funds are taxa2le for distri2uta2le income9
hile Indian Mutual funds currently offer tax(free income4 any ca$ital gains arising out of sale of fund nits are taxa2le9 %ll these tax considera tions are im$ortant in the decision on 5here to inest as the tax exem$tions or concessions alter returns o2tained from these inestments9 !ence4 classification Of Mutual funds from the taxa2ility $ers$ectie has great significance for inestors9 B!#a F(n t&*es b& Nat(!e #0 Invest)ents
Mutual funds may inest in e0uities4 2onds or other fixed income securities4 or short(term money market securities9 So 5e hae E0uity4 Bond and Money Market #unds9 %ll of them inest in financial assets9 But there are funds that inest in $hysical assets9 #or exam$le4 5e may hae 1old or other .recious Metals #unds4 or Real Estate #unds9 B!#a F(n T&*es b& Invest)ent Objective
Inestors and hence the mutual funds $ursue different o26ecties 5hile inesting9 'hus4 1ro5th #unds inest for medium to long(term ca$ital a$$reciation9 Income #unds inest to generate regular income4 and less for ca$ital a$$reciat ion9 /alue #unds inest in e0uities that are considered under( alued today4 5hose alue 5ill 2e unlocked in the future9
B!#a F(n T&*es b& Ris4 P!#0i$e
'he nature of a fundLs $ortfolio and its inestment o26ectie im$ly different leels of risk undertaken9 #unds are therefore often grou$ed in order of risk9 'hus4 E0uity funds hae a greater risk of ca$ital loss than a "e2t #und that seeks to $rotect the ca$ital 5hile looking for income9 Money Market #unds are ex$osed to less risk than een the Bond #unds4L since they inest in short(term fixed income securities4 as com$ared to longer(
3ousali Institute of Management Studies4 "har5ad ++
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
term $ortfolios of Bond #unds9
M#ne& Ma!4et F(ns
Often considered the lo5est rung order of risk leel4 Money Market #unds inest in securities of a short(term nature4 5hich generally means securities of less than one(year maturity9 'he ty$ical4 short(term interest(2earing instruments these funds inest in include 'reasury Bills issued 2y goernments9 Certificates of "e$osit issued 2y 2anks and Commercial .a$er issued 2y com$anies9 In India Money market Mutual funds also inest in the inter(2ank call money market9 'he ma6or strengths of money market funds are the li0uidity and safety or $rinci$al that inestors can normally ex$ect from short(term inestments9
Gi$t F(ns
1ilts are goernment securities 5ith medium to long(term maturities4 ty$ically of oer one year
!o5eer4 inestors hae to recogni>e the $otential changes in alues of de2t securities held 2y the funds that are caused L2y changes in the market $rice of de2t securities 0uoted on the stock exchanges
Next in the order of risk leel4 5e hae the general category "e2t #unds9 "e2t funds inest in de2t instruments issued not only 2y goernments4 2ut also 2y $riate com$anies4 2anks and financial institutions and other entities such as infrastructure
3ousali Institute of Management Studies4 "har5ad +@
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
com$aniesutilities9
By inesting in de2t4 these funds target lo5 risk and sta2le income for the inestor as their key o26ecties9 !o5eer4 as com$ared to the money market funds4 they do hae a higher $rice fluctuation risk4 since they inest longer(term securities9 Similarly com$ared to 1ilt #unds4 general de2t funds do hae a higher risk of default 2y their 2orro5ers9 "e2t #unds are largely considered as Income #unds as they do not target ca$ital a$$reciation4 look for high current income4 and therefore distri2ute a su2stantial $art of their sur$lus to inestors9 Income funds that target returns su2stantially a2oe market leels can face more risks9 'he Income #unds fall largely in the category of "e2t #unds as they inest $rimarily in fixed income generating de2t instruments9 %gain4 different inestment o26ecties set 2y the fund managers 5ould result in different risk $rofiles9 Dive!si0ie Debt F(ns
% de2t fund that inests in all aaila2le ty$es of de2t securities4 issued 2y entities across all industries and sectors is a $ro$erly diersified de2t fund9
hile de2t funds offer high income and less risk than e0uity funds4 inestors need to recogni>e that de2t securities are su26ect to risk of default 2y the issuer on $ayment of interest or $rinci$al9 % diersified de2t fund has the 2enefit of risk reduction through diersification and sharing of any defaul t(related losse s 2y a large num2er of inestors9 !ence a diersified de2t fund is less risky than a narro5(focus fund that inests in de2t securities of a $articular sector or industry9
3ousali Institute of Management Studies4 "har5ad +A
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
F#c(se Debt F(ns
Some de2t funds hae a narro5er focus4 5ith less diersification in its inestments9 Exam$les include sector4 s$eciali>ed and offshore de2t funds9
'hese funds are similar to the funds descri2ed later in the e0uity category exce$t that de2t funds hae a su2stantial $art of their $ortfolio ines ted in de2t instruments and are therefore more income oriented and inherently less risky than e0uity funds9 !o5eer Lthe Indian financial markets hae demonstrated that de2t funds should not 2e automatically considered to 2e less risky than e0uity funds4 as there hae 2een relatiely large default 2y issuers of de2t and many funds hae non($erforming assets in their de2t $ortfolios9 It should also 2e recogni>ed that market alues of de2t securities 5ill also fluctuate more as Indian de2t markets 5itness more trading and interest rate olatility in the future9 1i%" Yie$ Debt F(ns
&sually4 "e2t #unds control the 2orro5er default risk 2y inesting in securities issued 2y 2orro5ers 5ho are rated 2y credit rating agencies and are considered to 2e of inestment grade9 'here are !igh ield "e2t #und that seek to o2tain higher returns 2y inesting in de2t instruments that are considered 2elo5 inestment grade89; Clearly4 these funds are ex$osed to higher risk9 In &9S9%94 funds that inest in de2t instruments that are not 2acked 2y tangi2le assets and rated 2elo5 inestment grade <$o$ularly kno5n as 6unk 2onds= are called Dunk Bond #unds9 'hese funds tend to 2e more olatile than other de2t funds4 although they may earn higher returns as a result of the higher risks taken9
3ousali Institute of Management Studies4 "har5ad +*
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Ass(!e Ret(!n F(ns
#undamentally4 mutual funds hold assets in trust for inestors9 %ll returns and risks are for account of the inestor9 'he role of the fund Manager is to $roide the $rofessional management serice and to ensure the highest $ossi2le return consistent 5ith the inestment o26ectie of the fund9 %ssured return de2t fund certainly reduce the risk leel9
Fi,e Te!) P$ans
#ixed 'erm .lans are closed(end4 2ut usually for shorter term(less than a year9 Being of short duration4 they are not listed on a stock exchange9 %s inestors moe from "e2t #und category to E0uity #unds they face increased risk leel9 !o5eer4 there is a large ariety of E0uity #unds and all of them are not e0ually risk($rone9 Inestors and their adisors need to sort out and select the right e0uity fund that suits their risk a$$etite E0uity funds inest a ma6or $ortion of their cor$us in e0uity shares issued 2y com$anies4 ac0uired directly in initial $u2lic offerings or through the secondary market9 E0uity funds 5ould 2e ex$osed to the e0uity $rice fluctuation risk at the market leel at the industry or sector leel and at the com$any(s$ecific leel9 E0uity #unds Net %sset /alues fluctuate 5ith all these $rice moements9 'hese $rices are caused 2y all kinds of external factors4 $olitical and social as 5ell as economic9 !ence4 E0uity #unds are generally considered at the higher end of the risk s$ectrum among all funds aaila2le in the market9 E0uity funds ado$t different inestment strategic resulting in different leels of risk9 !ence4 they are generally se$arated into different ty$es in terms of their inestment styles9 Some of the ma6or ty$es of e0uity funds4 arranged in order of higher to lo5er risk leel9
3ousali Institute of Management Studies4 "har5ad +
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
A%%!essive G!#.t" F(ns
'here are many ty$es of stocksshares aaila2le in the marketG Blue Chi$s that are recogni>ed market leaders4 less researched stocks that are considered to hae future gro5th $otential4 and een some s$eculatie stocks of some5hat unkno5n or un$roen issuers9 #und managers seek out and inest in different ty$es of stocks in line 5ith their o5n $erce$tion of $otential returns and a$$etite for risk9
%ggressie gro5th funds target maximum ca$ital a$$reciation4 inest in less researched or s$eculatie shares and may ado$t s$eculatie inestment strategies to attain their o26ectie of high returns for the inestor9 Conse0uently4 they tend to 2e more olatile and riskier than other funds9
G!#.t" F(ns
'hese funds inest in com$anies 5hose earnings are ex$ected to rise at an a2oe aerage rate9 'hese com$anies may 2e o$erating in sectors like technology considered haing a gro5th $otential4 2ut not entirely un$roen and s$eculatie9 'he $rimary o26ectie of 1ro5th #unds is ca$ital a$$reciation oer a three to fie year s$an9 1ro5th funds are therefore less olatile than funds that target aggressie gro5th9
3ousali Institute of Management Studies4 "har5ad +)
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
S*ecia$t& F(ns
'hese funds hae a narro5 $ortfolio orientation and inest in only com$anies that meet $re(defined criteria9 #or exam$le4 at the height of the South %frican a$artheid regime4 many funds in the &9S9 offered $lans that $romised not to inest in South %frican com$anies9 Some funds may 2uild $ortfolios that 5ill exclude 'o2acco com$anies9 #unds that inest in $articular regions such as the Middle East or the %SE%N countries are also an exam$le of s$ecialty funds9 ithin the S$ecialty #unds category4 some funds may 2e 2road(2ased in terms of the ty$es of inestments in the $ortfolio9 !o5eer4 most s$ecialty funds tend to 2e concentrated funds4 since diersification is limited to one ty$e of inestment9 Clearly4 concentrated s$ecialty funds tend to 2e more olatile than diersified funds9
Sect#! F(ns
Sector fundsL $ortfolios consist of inestments in only one industry or sector of the market such as Information on 'echnology4 .harmaceuticals or #ast Moing Consumer 1oods that hae recently 2een launched in India9 Since sector funds do not diersify into multi$le se Offshore #unds9 O00s"#!e F(ns
'hese funds inest in e0uities in one or more foreign countries there2y achieing diersification across the countryLs 2orders9 !o5eer they also hae additional risks ( such as the foreign exchange rate risk ( and their $erform ance de$ends on the economic conditions of the countries they inest in9 Offshore E0uity #unds may inest in a single country
3ousali Institute of Management Studies4 "har5ad +J
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
S)a$$ Ca* E7(it& F(ns
'hese funds inest in shares of com$anies 5ith relatiely lo5er market ca$itali>ation than that of 2ig4 2lue chi$ com$anies9 'hey may thus 2e more olatile than other funds4 as smaller com$aniesL shares are not ery li0uid in the markets9 In terms of risk characteristics4 small com$any funds may 2e aggressie(gro5th or 6ust gro5th ty$e9
O*ti#n Inc#)e F(ns
O$tion Income #unds 5rite o$tions on a significant $art of their $ortfolio9 hile o$tions are ie5ed as risky instruments4 they may actually hel$ to control olatility4 if $ro$erly used9 Conseratie o$tion funds inest in large4 diidend $aying com$anies4 and then sell o$tions against their stock $ositions9 'his ensures a sta2le Income stream in the form of $remium income through selling o$tions and diidends9
Dive!si0ie E7(it& F(ns
% fund that seeks to inest only in e0uities exce$t for a ery small $ortion in li0uid money market securities4 2ut is not focused on any one or fe5 sectors or shares4 may 2e termed a diersified e0uity funds seek to reduce the sector or stock s$ecific risks through diersification9 'hey hae mainly market risk ex$osure9 "iersified funds arc clearly at the lo5er risk leel than gro5th funds
3ousali Institute of Management Studies4 "har5ad +K
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
E7(it& Lin4e Savin% Sc"e)es' An Inian Va!iant
In India4 the inestors hae 2een gien tax concessions to encourage them to inest in e0uity markets through these s$ecial schemes9 Inestment in these schemes entitles the inestor to claim an income tax re2ate4 2ut usually has a lock(in $eriod 2efore the end of 5hich funds cannot 2e 5ithdra5n9 'hese funds are su26ect to the general SEBI inestment guidelines for all e0uity funds4 and 5ould 2e in the "iersified E0uity #und category9 !o5eer4 as there are no s$ecific restrictions on 5hich sectors these funds ought to inest in4 inestors shoul d clearly look for 5here the #und Management Com$any $ro$oses to inest and accordingly 6udge the leel of risk inoled9
E7(it& Ine, F(ns
%n index fund tracks the $erformance of a s$ecific stock market index9 'he o26ectie is to match the $erformance of the stock market 2y tracking an index that re$resents the oerall market9 'he fund inests in shares that constitut e the index and in the same $ro$ortion as the index9 Since they generally inest in a diersified market index $ortfolio4 these funds take only the oerall market risk4 5hile reducing the sector and stock s$ecific risks through diersification9
Va$(e F(ns
/alue #unds try to seek out fundamentally sound com$anies 5hose shares arc currently under($riced in the market9 /alue #unds 5ill add only those shares to their $ortfolios that are selling at lo5 $rice(earnings ratios4 lo5 market to 2ook alue ratios and are underalued 2y other yardsticks9 /alue funds hae the e0uity market $rice fluctuation risks4 2ut stand often at a lo5er end of the risk s$ectrum in com$arison 5ith the 1ro5th #unds9 /alue Stocks may 2e from a
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BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
large num2er of sectors and therefore diersified9
E7(it& Inc#)e 0(ns
&sually income funds are in the "e2t #unds category4 as they target fixed income inestments9 !o5eer4 there are e0uity funds that can 2e designed to gie the inestor a high leel of current income along 5ith some steady ca$ital a$$reciation4 inesting mainly in shares of com$aniesL 5ith high diidend yields9 1&b!i F(ns 8 9(asi E7(it&:9(asi Debt
Money market holdings 5ill constitute a lo5er $ro$ortion in the oerall $ortfolios of de2t or e0uity funds9 'here are funds that4 ho5eer4 seek to hold a relatiely 2alanced holding of de2t and e0uity securities in their $ortfolio9 Such funds are termed hy2rid funds as they hae a dual e0uity2ond focus9
Ba$ance F(n
% 2alanced fund is one that has a $ortfolio com$rising de2t instruments4 conerti2le securities4 and .reference e0uity shares9 'heir assets are generally held in more or less e0ual $ro$ortions 2et5een de2tmoney market securities and e0uities9 By inesting in a mix of this nature4 2alanced funds seek to attain the o26ecties of income4 moderate ca$ital a$$reciation and $reseration of ca$ital4 and are ideal for inestors 5ith a conseratie and long(term orientation9 G!#.t"+an+Inc#)e F(ns
&nlike income(focused or gro5th(focused funds4 these funds seek to strike a 2alance 2et5een ca$ital a$$reciation and income for the inestor9 'heir $ortfolios are a mix 2et5een com$anies 5ith good diidend $aying records and those 5ith $otentia l for ca$ital a$$reciation9 'hese funds 5ould 2e less risky than $ure gro5th funds4 though more risky than income fund9
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C#))#it& F(ns
Commodity funds s$eciali>e in inesting in different commodities directly or through shares of commodity com$anies or through commodity future contracts9 S$eciali>ed funds may inest in a single commodity or a commodity grou$ such as edi2le oils or grains4 5hile diersified commodity funds 5ill s$read their assets oer many commodities9 Rea$ Estate F(ns
S$eciali>ed Real Estate #unds 5ould inest in Real Estate directly4 or may fund real estate deelo$ers4 or lend to them4 or 2uy shares of housing finance com$anies or may een 2uy their securities assets9
'he funds may hae a gro5th orientation or seek to gie inestors regular income9 'here has recently 2een an initiatie to offer such an income fund 2y the !"#C9
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TYPES OF MUTUAL FUND'+ MUTUALFUND TYPE
21O S1OULD INVEST
Ob je ctiv e
I n v e s t )e n t *#!t0#$i#
!igh
Iea$ invest)ent
"iersified e0uity funds
Moderate and aggressie inestors
!ighgro5th
Sector fund
%ggressie inestors Moderate inestors
! igh gro5th
E0uity shares
/ery high
'o generate returns 5hich are similar to the returns of the res$ectie index
.ortfolio like BSE9 Sensex4 Nifty4etc
Returns of N%/4 ery 5ith index $erformance
+(Ayears
+(Ayears
Index fund
E0uityshares
Ris4
+(Ayears
+(Ayears
E0uity linked saing scheme
Moderate and aggressie inestors
-ong(term gro5th 5ith tax saing
E 0uityshares
!igh
Balance fund
Moderate and aggressie inestors
1ro5th and regular income
Balance ratio of e0uity and de2t fund to ensure higher returns at lo5er risk
Ca$ital market risk and interest rate risk
Oer @ years
Bond funds
Salaried and conseratie inestors
Regular income
.redominantly de2enture goernment securities4 cor$orate 2onds
Credit risk and interest rate risk
Oer ,(+@months
1ilt fund
Salaried and conseratie inestors
Security and income
1oernment securities
Interest rate risk
Oer +@ months
Short(term funds
Inestors 5ith sur$lus short( term fund
-i0uidity and moderate income
Call money commercial $a$ers4 treasury 2ill short(term 1(secs
-inked interest rate risk
A5eeks Amonths
-i0uidity funds
Inestors 5ho $ark their
-i0uidity moderate
'reasury 2ills4 certificate of
Negligi2le Risk
@days A5eeks
fund in current account or short term 2ank fixed
income $reseration of ca$ital
de$osits 4 commercial $a$ers4 securities call money
3ousali Institute of Management Studies4 "har5ad @@
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED de$osits
Benefits of Mutual Fund
P#!t# $i# Dive!si0icati#n
Return on inestment from 6ust one industry or sector are su26ect to ho5 5ell or $oorly the industry fares9 But 5ith mutual fund one;s money is inested across different sector9 'his reduces the risk of lo5 returns on inestments4 2ecause rarely do different sectors decline at the same time9
P!#0essi#na$ Mana%e)ent
% mutual fund dra5s on the $rofessional ex$ertise of a team of research analysts and fund managers in inesting one;s saing in a num2er of securities9
Re(cti#n #0 T!ansacti#n C#sts
'he $urchase or sale of financial assets through the exchanges entails a certain $ro$ortion of changes kno5n as transaction made9 Inestments through mutual fund reduce these costs considera2ly as they en6oy the 2enefits of economies of scale9
Li7(iit&
If one inests in an o$en(ended mutual fund4 one can claim the money at net asset alue related $rices from the mutual fund itself9
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C#nvenience an F$e,ibi$it&
One has access to u$(to(date information on the alue of the inestment in addition to the inestments that hae 2een made 2y the scheme4 the $ro$ortion allocated to different assets and the fund manager;s inestment strategy9
Ret(!n P#tentia$
Inesting in a Mutual #und reduces $a$er5ork and hel$s to aoid many $ro2lems such as 2ad delieries4 delayed $ayments and follo5 u$ 5ith 2rokers and com$anies9 Mutual #unds sae time and make inesting easy and conenient9
T!ans*a!enc&
'hrough features such as regular inestment $lans4 regular 5ithdra5al $lans and diidend reinestment $lans4 one can systematically inest or 5ithdra5 funds according to once needs and conenience9
A00#!abi$it&
Inestors indiidually may lack sufficient funds to inest in high(grade stocks9 % mutual fund 2ecause of its large cor$us allo5s een a small inestor to take the 2enefit of its inestment strategy9
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2e$$ Re%($ate
%ll Mutual #unds are registered 5ith SEBI and they function 5ithin the $roisions of strict regulations designed to $rotect the interests of inestors9 'he o$erations of Mutual #unds are regularly monitored 2y SEBI9
M(t(a$ F(n In(st!&+A P!#0i$e O!i%in #0 M(t(a$ F(ns
'he Mutual #und industry traces its roots to England in the mid H +K??;s9 'he enactment of t5o British la5s4 the 6oint stock com$anies %cts of +K)@ and +K)J4 $ermitted inestors4 for the first time to share in the $rofits of an inestments enter$rise4 and limited inestor lia2ility to the amount of inestment ca$ital deoted to the enter$rise9 Shortly thereafter4 in +K)K4 the #oreign and Colonial 1oernment 'rust formed in -ondon9 'his trust resem2led a mutual fund in 2asic structure4 $roiding 7the inestor of moderate means the same adantage as the large ca$italistsP 2y s$reading the inestment oer a num2er of different stocks98
'his conce$t of offering the inestment $otential of financial markets to all indiiduals s$a5ned additional 7inestm ent com$anies8 in Britain and Scotland and among other things hel$ed finance the deelo$ment of the $ost(ciil 5as &S economy9 Most of the early British inestment com$anies or trusts resem2led today;s closed(end funds 2y issuing a fixed num2er of shares to grou$s of inestors 5hose 7$ooled8 assets 5ere inested in arious com$anies9 'he Scottish %merican Inestment 'rust4 formed on #e2ruary +4 +KJA 2y fund $ioneer Ro2ert #leming4 5as significant 2ecause it inested in the economic $otential of the &nited States Chiefly through %merican railroad 2onds9 Many other trusts follo5ed that not only target inestment in %merica4 2ut more im$ortantly led to the introduction of inestment fund conce$t on &9 S shares in the late +K??;s and early +,??;s9
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1ist#!& #0 t"e Inian M(t(a$ F(n In(st!&
'he mutual fund industry in India started in +,)A 5ith the formation of &nit 'rust of India4 at the initiatie of the 1oernment of India and Resere Bank the9 'he history of mutual funds in India can 2e 2roadly diided into four distinct $hases
Fi!st P"ase 8 ;<=>+?@ &nit 'rust of India <&'I= 5as esta2lished on +,)A 2y an %ct of .arliament9 It 5as set u$ 2y the Resere Bank of India and functioned under the Regulatory and administratie control of the Resere Bank of India9 In +,JK &'I 5as de(linked from the RBI and the Industrial "eelo$ment Bank of India
Sec#n P"ase 8 ;@+;<< 5Ent!& #0 P(b$ic Sect#! F(ns6
+,KJ marked the entry of non( &'I4 $u2lic sector mutual funds set u$ 2y $u2lic sector 2anks and -ife Insurance Cor$oration of India <-IC= and 1eneral Insurance Cor$oration of India <1IC=9 SBI Mutual #und 5as the first non( &'I Mutual #und esta2lished in Dune +,KJ follo5ed 2y Can 2ank Mutual #und <"ec KJ=4 .un6a2 National Bank Mutual #und <%ug K,=4 Indian Bank Mutual #und
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%t the end of +,,A4 the mutual fund industry had assets under management of Rs9*J4??* crores9
T"i! P"ase 8 ;<<+ 5Ent!& #0 P!ivate Sect#! F(ns6
ith the entry of $riate sector funds in +,,A4 a ne5 era started in the Indian mutual fund industry4 giing the Indian inestors a 5ider choice of fund families9 %lso4 +,,A 5as the year in 5hich the first Mutual #und Regulations came into 2eing4 under 5hich all mutual funds4 exce$t &'I 5ere to 2e registered and goerned9 'he erst5hile 3othari .ioneer
'he +,,A SEBI
'he num2er of mutual fund houses 5ent on increasing4 5ith many foreign mutual funds setting u$ funds in India and also the industry has 5itnessed seeral mergers and ac0uisitions9 %s at the end of Danuary @??A4 there 5ere AA mutual funds 5ith total assets of Rs9 +4@+4K? crores9 'he &nit 'rust of India 5ith Rs9**4*+ crores of assets under management 5as 5ay ahead of other mutual funds9 F#(!t" P"ase 8 since Feb!(a!&
In #e2ruary @??A4 follo5ing the re$eal of the &nit 'rust of India %ct +,)A &'I 5as 2ifurcated into t5o se$arate entities9 One is the S$ecified &ndertaking of the &nit 'rust of India 5ith assets under management of Rs9@,4KA crores as at the end of Danuary @??A4 re$resenting 2roadly4 the assets of &S )* scheme4 assured return and certain other schemes9 'he S$ecified &ndertaking of &nit 'rust of India4 functioning under an
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administrator and under the rules framed 2y 1oernment of India and does not come under the $urie5 of the Mutual #und Regulations9
'he second is the &'I Mutual #und -td4 s$onsored 2y SBI4 .NB4 BOB and -IC9 It is registered 5ith SEBI and functions under the Mutual #und Regulations9 ith the 2ifurcation of the erst5hile &'I 5hich had in March @??? more than Rs9J)4??? crores of assets under management and 5ith the setting u$ of a &'I Mutual #und4 conforming to the SEBI Mutual #und Regulations4 and 5ith recent mergers taking $lace among different $riate sector funds4 the mutual fund industry has entered its current $hase of consolidation and gro5th9 %s at the end of Se$tem2er4 @??*4 there 5ere @, funds4 5hich manage assets of Rs9+A+?K crores under *@+ schemes9
'he gra$h indicates the gro5th of assets oer the ye GROWTH IN ASSETS UNDER MANAGEMENT
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Growth of MF 250000 200000 150000 Rs. in Crores 100000 Rs. In Crore
50000 0 Mar- Mar- Mar- Mar- Mar- Mar- Mar65 87 93 03 04 05 06 Year
LIST OF MUTUAL FUNDS IN INDIA M(t(a$F(n
S*#ns#!s
Yea!#0 Ent!&
Bank s$onsored BOB %sset Management Co9 -td Bank of Baroda Can Bank Inestment Management CanaraBank
+,,@ +,KJ
Serices -td94 S9B9I9 #unds Management -td94 &'I %sset Management Co94 .t9
+,KJ +,)A
State Bank of India SBI4 .NB4 BOB4 -IC
-td94
Institutions 19I9C9 %sset Management Co9 -td94 1eneral Insurance
+,,?
Cor$oration F other * Deean Bhima Sahyoga %sset
.S& 1IC -IC
+,K,
Management Co9 -td94 Private Sectors Benchmark %sset Management Co9 NIC!E #inancial
@??+
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.t9-td94 Chola Mandalam %sset
Serices Chola Mandalam
Management Co9 -td94 Escorts %sset Management -td94 D9 M9 Ca$ital Management .t9
Inestments Escorts #inance D9M9 Shares and Stock
+,,J +,,) +,,*
-td94 Brokers 3otak Mahindra %sset Management 3otak Mahindra Bank
+,,K
Co9 -td94 Reliance Ca$ital %sset
RelianceCa$ital
+,,
Management Co9 -td94 Sahara %sset Management Co9 .t9
Sahara India #inance
+,,)
-td94 Sundaram %sset Management Co9
Sunadaram #inance
+,,)
-td94 'ata%ssetManagement.t9-td94 'ataSons Joint Ventures Predominantly Indian Birla Sun -ife %sset Management Birla 1lo2al #inance .t9 -td94 "9S9.9 Merrill -ynch #und
"9S9.9 Merrill -ynch
Manager -td94 !"#C %sset Management Co9 -td94
!"#C F Std -ife
+,, +,,* +,,) @???
Inestment Foreign Joint Ventures Predominantly %lliance Ca$ital %sset Management %lliance Ca$ital
+,,*
.t9 -td94 "eutsche %sset Management .t9
Management "eutsche %sset
@??@
-td94 #ranklin 'em$leton %sset
Management #ranklin 'em$leton
+,,)
Management .t9 -td94 Inestments !SBC %sset Manageent .t9 -td94 !SBC Security IN1 Ineatment Management .t9 IN11rou$
@??@ +,,,
-td94 Morgan Stanley Inestment
MorganStanley
+,,A
Management .t9 -td94 .rudential ICICI %sset
.rudentialICICI
+,,A
Management .t9 -td94 .rinci$al %sset Management Co9
.rinci$al #inancial
.t9 -td94
Serice
+,,*
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BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Standard Charted %sset
Standard Charted Bank
@???
Management -td94 < Source: Outlook Money : -aymen;s guide to M&'&%- #&N" =
Sa$es P!actices in t"e Inian M(t(a$ F(n Ma!4et A%ent c#))issi#ns
%gents are com$ensated 2y the funds through commissions4 commission rates9 In India there are no rules $rescri2ed for goerning the minimum r maximum commissions $aya2le 2y a fund to its agents9 Each fund has discretion to decide the commission structure for its agents9 'hus sundaram $ays commission to its agents as a 2asic rates $lus an incentie that de$ends on the olume of 2usiness9 In recent times funds hae 2een $aying commissions in the range of +9(@ Q on e0uity oriented funds and ?9*(?9K Q on de2t 2ased funds9 !igher commissions are generally $aid in case of inestments that are made 5ith the $ur$ose of taking tax 2enefits4 since inestors are re0uired to lock in their funds for a longer $eriod9
SEBI Re%($ati#ns
%lthough SEBI does not $rescri2e the minimum or maximum amount of commission $aya2le 2y a fund to agents under SEBI ed to charge the inestors are 7entry F exit8 loads to coer the fund distri2ution ex$enses9 'hese loads should not exceed the $ercentage s$ecified in the scheme;s offer document9 In case the agents commissions $aid 2y the fund result in oer all distri2ution ex$enses are to 2e 2orne 2y %MC i9e9 the excess cannot 2e $assed on to the unit holders9 % no H load4 charging no entry or exit loads is authori>ed to charge the schemes 5ith the commissions $aid to agents as $art of the regular management F marketing ex$enses allo5ed 2y SEBI9 SEBI $uts a ca$ on the total ex$enses
3ousali Institute of Management Studies4 "har5ad A+
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Ma!4e! P!actice
Some funds $ay the entire commission u$( fronts to the agents e that they $roide useful $rocessing and adisory serices to inestors4 F hae to incur costs in the $rocess that need to 2e coered from their 5ell desere commissions receied from the funds A%ents Ob$i%ati#n
Commissionother arrangements are 2et5een the fund and agent2roker9 Su2( 2rokers sere as agents of the $rinci$le agent and the fund is not ans5era2le for their actiities9 Clearly4 gien the need for and 5ides$read existence of a su2(2roker net5ork in India their role cannot 2e 5ashed a5ay9 But the distri2utors need to make the inestors a5are of 5hom they are dealing 5ith4 5hom the commission re2ate is receied from4 F 5hom should they contact in case of any $ro2lems9 %gents are 5ell adised to $ractice honesty F trans$arency in ex$laining the commission structure F the timing of any re2ate $ayment to the inestors4 5hose trust 5ill 2uild a long(term relationshi$9
3ousali Institute of Management Studies4 "har5ad A@
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
T"e AMFI C#e #0 Et"ics
One of the o26ects of the %ssociation of Mutual #unds in India <%M#I= is to $romote the inestors; interest 2y defining and maintaining high ethical and $rofessional standards in the mutual fund industry9 In $ursuance of this o26ectie4 %M#I had constituted a Committee under the Chairmanshi$ of Shri %9 .9 .radhan 5ith Shri S9 /9 Doshi4 Shri C9 19 .arekh and Shri M9 -axman 3umar as mem2ers9 'his Committee4 5orking in close co(o$eration 5ith .rice aterhouseH--. under the #IRE .ro6ect of &S%I"4 has drafted the Code4 5hich has 2een a$$roed and recommended 2y the Board of %M#I for im$lementation 2y its mem2ers9 I take o$$ortunity to thank all of them for their efforts9
'he %M#I Code of Ethics4 7'he %CE8 for short4 sets out the standards of good $ractices to 2e follo5ed 2y the %sset Management Com$anies in their o$erations and in their dealings 5ith inestors4 intermediaries and the $u2lic9 SEBI
'his is the first edition of the Code and it may 2e su$$lemented further as may 2e necessary9 I ho$e mem2ers of %M#I 5ould im$lement the code and ensure that their em$loyees are made fully a5are of the Code9
3ousali Institute of Management Studies4 "har5ad AA
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
;/
INTEGRITY
+9+
Mem2ers and their key $ersonnel4 in the conduct of their 2usiness shall o2sere high standards of integrity and fairness in all dealings 5ith inestors4 issuers4 market intermediaries4 other mem2ers and regulatory and other goernment authorities
+9@
Mutual #und Schemes shall 2e org ani>ed4 o$erated4 managed and t heir $ortfolios of securities selected4 in the interest of all classes of unit holders and not in the interest of
S$onsors
"irectors of Mem2ers
Mem2ers of Board of 'rustees or directors of the 'rustee com$any
Brokers and other market intermediaries
%ssociates of the Mem2ers
% s$ecial class selected from out of unit holders
/
D(e Di$i%ence
@9+
Mem2ers in the conduct of there %sset Management 2usiness shall at all time9
@9@
Render high standards of serice9
Exercise due diligence9
Exercise inde$endent $rofessional 6udgment9
Mem2ers shall hae and em$loy effectiely ade0uate resources and $rocedures4 5hich are needed for the conduct of %sset Management actiities9
3ousali Institute of Management Studies4 "har5ad A*
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
/
Disc$#s(!es
A9+
Mem2ers shall ensure timely dissemination to all unit holders of ade0uate4 accurate4 and ex$licit information $resented in a sim$le language a2out the inestment o26ecties4 inestment $olicies4 financial $osition and general affairs of the scheme9
A9@
Mem2ers shall disclose to unit holders inestment $attern4 $ortfolio details4 ratios of ex$enses to net assets and total income and $ortfolio turnoer 5hereer a$$lica2le in res$ect of schemes on annual 2asis9
A9A
Mem2ers shall in res$ect of transactions of $urchase and sale of securities entered into 5ith any of their associates or any significant unit holder9
Su2mit to the Board of 'rustees details of such transactions4 6ustifying its fairness to the scheme9
"isclose to the unit holders details of the transaction in 2rief through annual and half yearly re$orts9
A9*
%ll transactions of $u rchase an d sale of se curities 2y key $e rsonnel 5ho ar e directly inoled in inestment o$erations shall 2e disclosed to the com$liance officer of the mem2er at least on half yearly 2asis and su2se0uently re$orted to the Board of 'rustees if found haing conflict of interest 5ith the transactions of the fund9
>/
P!#0essi#na$ Se$$in% P!actices
*9+
Mem2ers shall not use any unethical means to sell4 market or induce any inestor
*9@
to 2uy their $roducts and schemes Mem2ers shall not make any exaggerated statement regarding $erformance of any $roduct or scheme9
3ousali Institute of Management Studies4 "har5ad A
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
*9A
Mem2ers shall endeaor to ensure that at all times
Inestors are $roided 5ith true and ade0uate information 5ithout any misleading or exaggerated claims to inestors a2out their ca$a2ility to render certain serices or their achieements in regard to serices rendered to other clients4
Inestors are made a5are of attendant risks in mem2ers; schemes 2efore the inestors make any inestment decision4
Co$ies of $ros$ectus4 memoranda and related literature is made aaila2le to inestors on re0uest4
%de0uate ste$s are taken for fair allotment of mutual fund units and refund of a$$lication moneys 5ithout delay and 5ithin the $rescri2ed time limits and4
*9*
Com$laints from inestors are fairly and ex$editiously dealt 5ith9
Mem2ers in all their communications to inestors and selling agents shall Not $resent a mutual fund scheme as if it 5ere a ne5 share issue
Not create unrealistic ex$ectations
Not guarantee returns exce$t as stated in the Offer "ocument of the scheme a$$roed 2y SEBI4 and in such case4 the Mem2ers shall ensure that ade0uate resources 5ill 2e made aaila2le and maintained to meet the guaranteed returns9
Coney in clear terms the market risk and the inestment risks of any scheme 2eing offered 2y the Mem2ers9
Not induce inestors 2y offering 2enefits4 5hich are extraneous to the scheme9
Not misre$resent either 2y stating information in a manner calculated to mislead or 2y omitting to state information 5hich is material to making an informed inestment decision9
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BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
/
Invest)ent P!actice
9+
Mem2ers
shall
manage
all
the
schemes
in
accordance
5ith
the
fundamental inestment o26ecties and inestment $olicies stated in the offer documents and take inestment decisions solely in the interest of the unit holders9
9@
Mem2ers shall not kno5ingly 2uy or sell securities for any of their schemes from or to
%ny director4 officer4 or em$loyee of the mem2er
%ny trustee or any director4 officer4 or em$loyee of the 'rustee Com$any
=/
O*e!ati#ns
)9+
Mem2ers shall aoid conflicts of interest in managing the affairs of the schemes and shall kee$ the interest of all unit holders $aramoun t in all matters relating to the scheme9
)9@
Mem2ers or any of their directors4 officers or em$loyees shall not indulge in front running <2uying or selling of any securities ahead of transaction of the fund4 5ith access to informati on regarding the transaction 5hich is not $u2lic and 5hich is material to making an inestment decision4 so as to derie unfair adantage=9
)9A
Mem2ers or any of their directors4 officers or em$loyees shall not indulge in self( dealing
)9*
Mem2ers shall not engage in any act4 $ractice or course of 2usiness in connection 5ith the $urchase or sale4 directly or indirectly4 of any security held or to 2e ac0uired 2y any scheme managed 2y the mem2ers4 and in $urchase4 sale and
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BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
redem$tion of units of schemes managed 2y the mem2ers4 5hich is fraudulent4 dece$tie or mani$ulatie9
)9
Mem2ers shall not4 in res$ect of any securities4 2e $arty to(
Creating a false market4
.rice rigging or mani$ulation
.assing of $rice sensitie information to 2rokers4 Mem2ers of stock exchanges and other $layers in the ca$ital markets or take action4 5hich is unethical or unfair to inestors9
)9)
Em$loyees4 off icers and directors of th e Mem2ers shall not 5ork as age nts 2rokers for selling of the schemes of the Mem2ers4 exce$t in their ca$acity as em$loyees of the Mem2er or the 'rustee Com$any9
)9J
Mem2ers shall not make any change in the fundamental attri2utes of a scheme4 5ithout the $rior a$$roal of unit holders exce$t 5hen such change is conse0uent on changes in the regulations9
)9K
Mem2ers shall aoid excessie concentration of 2usiness 5ith any 2roking firm4 and excessie holding of units in a scheme 2y fe5 $ersons or entities9
@/
Re*#!tin% P!actices
J9+
Mem2ers shall follo5 com$ara2le and standardi>ed aluation $olicies in 5ith the SEBI Mutual #und Regulations9
J9@ %ccordance Mem2ers shall foll o5 uniform $erform ance re$orting on the 2asis of total return9 J9A
Mem2ers shall ensure scheme 5ise segregation of cash and securities accounts9
3ousali Institute of Management Studies4 "har5ad AK
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
?/
Un0ai! C#)*etiti#n
Mem2ers shall not make any statement or 2ecome $riy to any act4 $ractice or com$etition4 5hich is likely to 2e harmful to the interests of
other Mem2ers or is likely to $lace other9 Mem2ers in a disadantageous $osition in relation to a market $layer or inestors4 5hile com$eting for inesti2le funds9
O
Obse!vance #0 Stat(tes R($es an Re%($ati#ns
Mem2ers shall a2ide 2y the letter and s$irit of the $roisions of the Statutes4 rules and regulations4 5hich may 2e a$$lica2le4 and releant to the actiities carried on 2y the mem2ers9
;/
En0#!ce)ent Me)be!s s"a$$
idely disseminate the %M#I Code to all $ersons and entities coered 2y it
Make o2serance of the Code a condition of em$loyment
Make iolation of the $roisions of the code4 a ground for reocation of contractual arrangement 5ithout redress and a cause for disci$linary action
Re0uire that each officer and em$loyee of the Mem2er sign a statement that
Esta2lish internal controls and com$liance mechanisms4 including assigning
heshe has receied and read a co$y of the Code
su$erisory res$onsi2ility
"esignate one $erson 5ith $rimary res$onsi2ility for exercising com$liance 5ith $o5er to fully inestigate all $ossi2le iolations and re$ort to com$etent authority
3ousali Institute of Management Studies4 "har5ad A,
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
#ile regular re$orts to the 'rustees on a half yearly and annual 2asis regarding o2serance of the Code and s$ecial re$orts as circumstances re0uire
Maintain records of all actiities and transactions for at least three years4 5hich records shall 2e su26ect to reie5 2y the 'rustees
"edicate ade0uate resources to carrying out the $roisions of the Code
St!(ct(!e #0 M(t(a$ F(ns in Inia
-ike other countries4 India has a legal frame5ork 5ithin 5hich mutual funds 2e constituted9 &nlike in the &34 5here t5o distinct trust; and cor$orate; structures are follo5ed 5ith se$arate regulations4 in India o$en(end and closed end funds o$erate under the same regulatory structure and are constituted along one uni0ue structure H as unit trusts9 % mutual fund in India is allo5ed to issue o$en(end and closed(end schemes under a common legal structure9 'herefore4 a mutual fund may hae seeral different schemes
'he structure is re0uired to 2e follo5ed 2y mutual funds in India is laid do5n under SEBI
3ousali Institute of Management Studies4 "har5ad *?
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
SEBI
TRUSTEE
SPONSOR
OPERATIONS
AMC
FUND MANAGER
MARET : SALES
MUTUAL FUND
SC1EMES
INVESTOR
3ousali Institute of Management Studies4 "har5ad *+
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
S*#ns#!
hat a $romoter is to a com$any4 a s$onsor is to a mutual fund9 'he s$onsor initiates the idea to set u$ a mutual fund9 It could 2e a financial serices com$any4 a 2ank or a financial institution9 It could 2e Indian of foreign9 It could do it alone or through a 6oint enture9 In order to run a mutual fund in India4 the s$onsor has to o2tain a license from SEBI9 #or this4 it has to satisfy certain conditions4 such as a ca$ital and $rofits4 2ack records
Asset Mana%e)ent C#)*an& 5AMC6
%n %MC is the legal entity formed 2y the s$onsor to run a mutual fund9 It;s the %MC that em$loys fund managers and analyst4 and other $ersonnel9 It;s the %MC that handles all o$erati onal matters of a mutual fund H from launching schemes to managing them to interacting 5ith inestors9
'he $eo$le in the %MC 5ho should matter the most to you are those 5ho take inestment decisions9 'here is the head of the fund house4 generally referred to as the chief executie officer
3ousali Institute of Management Studies4 "har5ad *@
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Trustees 'rustees are like internal regulations in a mutual fund4 and their 6o2 is to $rotect the interests of unit holders9 'rustees are a$$ointed or cor$orate 2odies9 In order to ensure
'hey are im$artial and fair4 SEBI rules mandate that at least t5o thirds of the trustees 2e inde$endent that is4 not hae any association 5ith the s$onsor9
'rustees a$$oint the %MC4 su2se0uently seeks their a$$roal for the 5ork it does and re$orts $eriodically to them on ho5 the 2usiness is 2eing run9 'rustees float and market schemes and secure necessary a$$roals9 'hey check if the %MC inestments are 5ithin defined limits and 5hether the funds accounta2le for financial irregularities in the mutual fund9
C(st#ian
% custodian handles the inestment 2ack office of a mutual fund9 Its res$onsi2ilities include recei$t and deliery of securities4 collection of income4 and distri2ution of diidends and segregation of assets 2et5een schemes9 'he s$onsor of a mutual fund cannot act as a custodian to the fund9 'his condition4 formulated in the interest of inestors4 ensures that the assets of a mutual fund are not in the hands of its s$onsor9 #or exam$le "eutsche Bank is a custodian 2ut it cannot serice "eutsche Mutual #und4 its mutual fund arm9
Re%ist!a!
Registrars also kno5n as transfer agents4 handles all inestor related serices9 'his includes issuing and red reaming units9 Sending fact sheet and annual re$orts9 Some fund houses handle such functions in house9 Others outsource it to registrarsG 3ary and C%MS are the more $o$ular ones9 It doesn;t really matter 5hich model your mutual fund
3ousali Institute of Management Studies4 "har5ad *A
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
o$ts for4 as long as it is $rom$t and efficient in sericing you9 Most mutual funds in addition to registrars also hae inestor serice centers of their o5n in some cities9
Recent T!ens in M(t(a$ F(n In(st!&
'he most im$ortant trend in the mutual fund industry is the aggressie ex$ansion of the #oreign o5ned mutual fund com$anies and the decline of the com$anies floated 2y Nationali>ed Banks and smaller .riate Sector $layers9 Many Nationali>ed 2anks got into the mutual fund 2usiness in the early nineties and got off to a good start due to the stock market 2oom $reailing then9 'hese 2anks did not really understand the mutual fund 2usiness and they 6ust ie5ed it as another kind of 2anking actiity9 #e5 hired s$eciali>ed staff and generally chose to transfer staff from the $arent organi>ation9 'he $erformance of the schemes floated 2y these funds 5as not good9
Some schemes offered guaranteed returns and their $arent organi>ation had to 2ail out these %MCs 2y $aying large amounts of money as the difference 2et5ee n the guaranteed and actual returns9 'he serice leels 5ere also ery 2ad9 Most of these %MCs hae not 2een a2le to retain staff4 float ne5 schemes etc9 and it is dou2tful 5hether4 2arring a fe5 exce$tions they hae serious $lans of continuing the actiity in a ma6or 5ay9 'he ex$erience of some of the %MCs floated 2y $riate sector Indian com$anies 5as also ery similar9 'hey 0uickly reali>ed that the %MC 2usiness4 5hich makes money
3ousali Institute of Management Studies4 "har5ad **
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
in the long term and re0uires dee$($ocketed su$$ort in the intermediate years9 Some hae sold out to #oreign o5ned com$anies4 some hae merged 5ith others and there is general restructuring going on9
'he #oreign o5ned com$anies hae dee$ $ockets and come in here 5ith the ex$ectation of a long haul9 'hey can 2e credited 5ith introducing many ne5 $ractices such as ne5 $roduct innoation4 shar$ im$roement in serice standards and disclosure4 usage of technology4 2roker education and su$$ort etc9 In fact they hae forced the industry to
&$grade it and serice leels of organi>ations like &'I hae im$roed dramatically in the last fe5 years in res$onse to the com$etition $roided 2y these com$anies9 F(t(!e Scena!i#
'he asset 2ase 5ill continue to gro5 at an annual rate of a2out A? to AQ oer the next fe5 years as inestors shift their assets from 2anks and other traditional aenues9 Some of the older and $riate sector $layers 5ill either close sho$ or 2e taken oer9
In the coming years the market 5ill 5itness a flurry of ne5 $layers entering the arena9 'here 5ill 2e a large num2er of offers from arious %MCs in the time to come9 Some 2ig names like #idelity4 .rinci$al4 and Old Mutual etc9 are looking at Indian market seriously9 One im$ortant reason for it is that most ma6or $layers already hae $resence here and hence these 2ig names 5ould hardly like to get left 2ehind9 'he mutual fund industry is a5aiting the introduction of
3ousali Institute of Management Studies4 "har5ad *
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
"eriaties in India as this 5ould ena2le it to hedge its risk and this in turn 5ould 2e reflected in its N%/9
SEBI is 5orking out the norms for ena2ling the existing mutual fund schemes to trade in deriaties9 Im$ortantly4 many market $layers hae called on the regulator to initiate the $rocess immediately4 so that the mutual funds can im$lement the changes that are re0uired to trade deriaties9 G$#ba$ Scena!i#
Some 2asic facts
'he money market mutual fund segment has a total cor$us of +9*K trillion in the &9S9 against a cor$us of +?? million in India9
Out of the to$ +? mutual funds 5orld5ide4 eight are 2ank( s$onsored9 Only #idelity and Ca$ital are non(2ank mutual funds in this grou$9
In the &9S9 the total num2er of schemes is higher than that of the listed com$anies 5hile in India 5e hae 6ust @JJ schemes
Internationally4 mutual funds are allo5ed to go short9 In India fund managers do not hae such lee5ay9
In the &9S9 a2out ,9J million households 5ill manage their assets on(line 2y the year @??A4 such a facility is not yet of aail in India9
On( line trading is a great idea to reduce management ex$enses from the current @ Q of total assets to a2out ?9J Q of the total assets9
3ousali Institute of Management Studies4 "har5ad *)
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
KQ of the core customer 2ases of mutual funds in the to$ ?(2roking firms in the &9S9 are ex$ected to trade on(line 2y @??A9
Internationally4 on( line inesting continues its meteoric rise9 Many hae de2ated a2out the success of e( commerce and its 2reakthroughs4 2ut it is true that this as$ect of technology could and 5ill change the 5ay financial sectors function9 !o5eer4 mutual funds cannot 2e left far 2ehind9 'hey hae reali>ed the $otential of the Internet and are e0ui$$ing themseles to $erform 2etter9
In fact in adanced countries like the &9S9%4 mutual funds 2uy( sell transactions hae already 2egun on the Net4 5hile in India the Net is used as a source of Information . Such changes could facilitate easy access4 lo5er intermediation costs and 2etter serices for all9 % research agency that s$eciali>es in Internet technology estimat es that oer the next four years Mutual #und %ssets traded on( line 5ill gro5 ten folds from +@K 2illion to +4@@J 2illionG 5hereas e0uity assets traded on(line 5ill increase during the $eriod from @*) 2illion to +4)+ 2illion9 'his 5ill increase the share of mutual funds from A*Q to *?Q during the $eriod 9 Such increases in olumes are ex$ected to 2ring a2out large changes in the 5ay Mutual #unds conduct their 2usiness9
!ere are some of the 2asic changes that hae taken $lace since the adent of the Net9 L#.e! C#sts
"istri2ution of funds 5ill fall in the online trading regime 2y @??A9 Mutual funds could 2ring do5n their administratie costs to ?9JQ if trading is done on( line9 %s $er SEBI regulations4 2ond funds can charge a maximum of @9@Q and e0uity funds can charge @9Q as administratie fees9 'herefore if the administratie costs are lo54 the 2enefits are $assed do5n and hence Mutual #unds are a2le to attract mire inestors and increase their asset 2ase9
3ousali Institute of Management Studies4 "har5ad *J
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED Bette! avice Mutual funds could $roide 2etter adice to their inestors through the Net rather than through the traditional inestment routes 5here there is an additional channel to deal 5ith the Brokers9 "irect dealing 5ith the fund could hel$ the inestor 5ith their financial $lanning / In
India4 2rokers could get more Net say than inestors and could hel$ the inestors 5ith the kno5ledge through get from the Net9
Ne. invest#!s .#($ *!e0e! #n$ine
Mutual funds can target inestors 5ho are young indiiduals and 5ho are Net say4 since sericing them 5ould 2e easier on the Net9 India has around +9) million net users 5ho are $rime target for these funds and this could 6ust 2e the 2eginning9 'he Internet users are going to increase dramatically and mutual funds are going to 2e the 2est 2eneficiary9 ith smaller administratie costs more funds 5ould 2e mo2ili>ed 9% fund manager must 2e ready to tackle the olatility and 5ill hae to maintain sufficient amount of inestments 5hich are high li0uidity and lo5 yielding inestments to honor redem$tion9
Net+base ave!tise)ents
'here 5ill 2e more sites inoled in ads and $romotion of mutual funds9 In the &9S9 sites like %O- offer detailed research and financial details a2out the functioning of different funds and their $erformance statistics9 a is 5itnessing a genesis in this area9 'here are many site s such as indiainfoline.com and indiafn9com that are doing something similar and $roiding adice to inestors regarding their inestments9 In the &9S9 most mutual funds concentrate only on financial funds like e0uity and de2t9 Some like real estate funds and commodity funds also take an ex$osure to $hysical assets9 'he latter ty$e of funds are $referred 2y cor$orate 5ho 5ant to hedge their ex$osure to the commodities they deal 5ith9
3ousali Institute of Management Studies4 "har5ad *K
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
#or instance4 a ca2le manufacturer 5ho needs +?? tons of Co$$er in the month of Danuary could 2uy an e0uialent amount of co$$er 2y inesting in a co$$er fund9 #or Exam$le4 .ermanent .ortfolio #und4 a conseratie &9S9 2ased fund inests a fixed $ercentage of it;s cor$us in 1old4 Siler4 S5iss francs4 s$ecific stocks on arious 2ourses around the 5orld4 short Hterm and long(term &9S9 treasuries etc9
In &9S9%9 a$art from 2ullion funds there are co$$er funds4 $recious metal funds and real estate funds
In deelo$ed countries like the &9S9% there are funds to satisfy eery2ody;s re0uirement4 2ut in India only the ti$ of the ice2erg has 2een ex$lored9 In the near future India too 5ill concentrate on financial as 5ell as $hysical funds9 C#!*(s'+
Inesting in a scheme is a sim$le $rocess9 Duts 5alk into any office of the mutual fund or that of its re$resentaties9 #ill u$ a short and sim$le form4 and hand oer a che0ue9 ours money gets added to the $ool already 5ith the scheme4 gien to it 2y numerous other inestors like you9 'he total money aaila2le 5ith a scheme at any $oint in time is referred to as the 7Cor$us8 or %sset under management ;the mutual fund4 on your and other inestors 2ehalf inests this cor$us in arious securities in line 5ith its sated o26ecties
Units'
3ousali Institute of Management Studies4 "har5ad *,
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Mutual fund issues you units; against your inestment9 % unit is the currency of a fund9 hat a share is to com$any4 a unit is to a fund9
Net asset va$(e
measured $er unit4 is called the Net %sset /alue
Is Rs +?9 ou 5ill 2e allotted +??? units <+????+?= roughly H the fund charges a nominal $rocessing fee9
'he N%/ of any scheme tells ho5 much each units of its is 5orth at any $oint in time4 and is therefore the sim$lest measure of ho5 it is $erforming9 Schemes N%/ is its net assets
3ousali Institute of Management Studies4 "har5ad ?
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
leae9 If the N%/ of your scheme rises from Rs +? to Rs4 ++ oer a $eriod of time4 your scheme is said to hae generated a return of +?Q9 Similarly4 if its N%/ falls from Rs +? to Rs ,4 it is said to hae lost +?Q
#und house hae to calculate and disclose the N%/;s of their schemes daily fund N%/;s can 2e easily looked u$9 hile dailies gie a random listing of schemes the financial $a$ers are more exhaustie in their coerage9N%/ information is also aaila2le on 5e2site4 of the mutual fund concerned and of inde$endent data $roiders9 hen inested in a scheme4 its N%/ is the figure to track as it 0ualifies your returns and your $urchase $rice and sale $rice 5ill 2e 2ased on it9
L#a'+
%lthough the N%/ re$resents scheme current market alue it is not the exact $rice at 5hich an inestor enters or exits the scheme9 #und houses ley a nominal charge4 on most of their schemes4 to meet their $rocessing costs and to discourage inestors from lacking9 'his charge is referred to as load; and it is $rice you $ay oer and a2oe the fund N%/ 5hen you 2uy or cell units9
ou $ay an entry load; at the time 2uying units and an exit load; 5hile selli ng9 -oads are al5ays ex$ressed as $ercentage of the N%/4 and hae the effect of reducing your returns9 %n entry load increases your N%/4 5hich $laces fe5er units in your hands9 %n exit load decrease you;re N%/ of Rs +? and it leies an entry and exit load of +Q <+? $aisa= each9 So 5hen you 2uy units you;ll $ay Rs +?9+ <+??9+?=$er unit4 not Rs +?9 Similarly if you sell you;ll get Rs ,9,?<+?(?9+?= $er unit4 not Rs +?9 &nder SEBI rules4 the sum of entry and exit loads charged 2y a scheme cannot exceed JQ
C#st #0 invest)ent in )(t(a$ 0(n'+ %nother entry that eats into your return is ex$enses; this is 5hat your fund charges you for managing your only9 #und managers hae to 2e $aid a fee4 as do the
3ousali Institute of Management Studies4 "har5ad +
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
other constraints inoled in managing your money9 %ll this entails costs4 5hich your scheme recoers from you4 5ithin limits9 Eery year4 a fund charges same amount to your schemes N%/ reducing your returns 2y that amount9 SEBI rules allo5 e0uity schemes to charge a maximum of @9Qof cor$us as ex$enses eery year4 the corres$onding figure for de2t schemes is @9@Q
SEBI also decides 5hat kind of ex$enses a fund can charge its unit holders and 5hat it cannot9 #or e9g9: the cost of running a cam$aign a2out a fund haing 5on an a5ard cannot 2e charged to inestors9
Disc$#s(!es'+
#rom time to time4 your fund house 5ill share 5ith you information relating to your scheme9 It does this in arious 5ays4 in arious degrees9 &nder SEBI rules4 fund houses hae to send to all unit holder;s annual re$orts disclosing the com$lete $ortfol io of all units holders; annul re$orts disclosing the com$lete $ortfolio of all units holders; annul re$orts disclosing the com$ete $ortfolio of all their schemes and $u2lish half(yearly results in ne5s$a$ers9 'hese document shade light on your schemes $erforming oer arious time $eriods4 and ho5 it stands u$4 gien market conditions9
Some fund house goes 2eyond such mandatory information sharing9 hateer information is releant to your inestment they send it to you on a 0uarterly 2asis
4
through fax and ne5sletters9 Most fund houses u$date their scheme $ortfolio on their 5e2site een 0uicker4 the norm 2eing on a monthly 2asis9 'his information you can use to make an inestment in the schemes
Ree)*ti#n'+ heneer you 5ant4 you can sell your units4 $artly or fully 2ack to your fund9 %lthough it;s sale from your $oint of ie5 in mutual fund $arlance it is called
3ousali Institute of Management Studies4 "har5ad @
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
re$urchase or redem$tion; you;ll hae to fill u$ another short and sim$le from your Mutual fund 5ill $ay you the schemes N%/ $reailing on that date minus the exit load4 Mail you a che0ue 5ithin three to fie days9
DISTRIBUTION COMPANIES9 % distri2ution com$any has seeral agents and distri2utors 5orking for it4 and is the transitional interface 5ith the mutual fund9 It is institutional agent for a mutual fund4 and earns commissions on funds mo2ili>ed9 "istri2ution com$anies are a ery $o$ular channel 5ith mutual fund today9
C#)*an& P!#0i$e Int!#(cti#n'+
VISION: ”To be the most trusted name in investment and wealth management, to be the preferred employer in the industry and to be a catalyst for growth and excellence of the asset management business in India”.
MISSION: To consistently pursue investor's wealth optimization by: •
Achieving superior and consistent investment results
•
Creating a conducive environment to hone and retain talent •
Providing customer delight 3ousali Institute of Management Studies4 "har5ad A
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
•
Institutionalizing system-approach in all aspects of functioning
•
Upholding highest standards of ethical values at all times
Biral Sun -ife #inancial Serices offers a range of financial serices for resident Indians and Non Residents Indians9Birla Sun -ife "istri2ution Co9 -td9 a $art of the Doint
/enture 2et5een 'he %ditya Biral 1rou$ and Sun -ife #inancial of Canada9 'he synergy of these t5o accom$lished conglomerates 2rings the glo2al financial kno5(ho5 and local market insight9 It is the aim of the com$any to offer dierse and to$ 0uality financial serices to customers9 'he Mutual #und and Insurance com$anies $roide 5ealth management and $rotection $roducts to customers 5hile the "istri2ution and Securities com$anies $roide 2rokerage and trading serices for inestment in e0uities4 de2t securities4 fixed de$osits4 etc9
It is said that: 'o ac0uire 5ealth is difficul t4 to $resere it more difficult4 2ut to nourish it 5isely4 the most difficult of all9
'he com$any;s commitment to excellence along 5ith a roots u$ a$$roach to research and analysis4 cou$led 5ith technology drien $rocesses has ena2led them to excel at this challenging task and in a s$an of four years emerge as one of the leading distri2ution houses of the country9
no!ledge is a treasure "ut practice is t#e $ey to it%
3ousali Institute of Management Studies4 "har5ad *
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
'he com$any 2eliees that the desire for kno5ledge increases 5ith the ac0uisition of it9 %t Birla Sun -ife "istri2ution they make the 2est use of intellect and ex$ertise $utting kno5ledge to good $ractice9 %s and 5hen and 5here inestors need it9
#or com$any the conce$t of $erfect serice is contently ex$anding9 'his along 5ith trans$arent 2usiness ethics4 ins$ired and innoatie solutions is 5hat their inestors hae come to ex$ect from them9
% fact4 5hich has 2een reaffirmed 2y recognition and a5ards4 conferred on them 2y the leading names of the India #inancial Serices Industry9
STRUCTURE OF FINANCIAL SERVICES
Bi!$a S(n Li0e Financia$ Se!vices
BirlaSun-ife Mutual#und
BirlaSun-ife Insurance
BirlaSun-ife "istri2ution
:
Biral Sun -ife Mutual #und follo 5s a conseratie long(term a$$roach to inestment4 5hich is 2ased on identifying com$anies that hae good credit(5orthiness and are fundamentally strong9 It $laces a lot of em$hasis on 0uality of management and risk control9 'his is done through extensie analysis that includes factory isits and field research9 It has one of the largest team of research analysts in the industry9 'he com$any
3ousali Institute of Management Studies4 "har5ad
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
is one of IndiaLs leading4 $riate mutual funds 5ith a large customer 2ase9 It has 2een recogni>ed nationally 5ith coeted a5ards9
Bi!a$ S(n Li0e Ins(!ance C#)*an& Li)ite' Insurance is not a2out something going 5rong9 ItLs often a2out things going right9 One of the 5onders of human nature is that 5e neer 2eliee anything can actually go 5rong9 Surely4 life has its share of ifs9 %t Biral Sun -ife ho5eer4 com$any 2eliee it has its e0ually $leasant share of 2uts as 5ell9 Biral Sun -ife stand committed to hel$ing $eo$le reali>e those ha$$y moments 5hich make a life9 Be it liing the same lifestyle in their $ost retirement days or $roiding a secure future for their loed ones4 in case something ha$$ens to them9
Bi!$a S(n Li0e Dist!ib(ti#n C#)*an& Li)ite'
VISION: “To be the first performance of our customers as a integrated provider of complete financial services through superior value creation and technology”. %t Birla Sun -ife "istri2ution4 they $ut kno5ledge4 ex$ertise and ex$erience to good use to $resere4 nurture and nourish your 5ealth9 #or customers today and tomorro59 They are a part of the Joint ent!re "et#een The $%itya &ir'a (ro!p an% )!n *ife +inan,ia' of Cana%a. The synery of these t#o a,,op'ishe% ,on'oerates "rins in/estors 'o"a' finan,ia' 0no#-ho# an% 'o,a' ar0et insiht.
3ousali Institute of Management Studies4 "har5ad )
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
It is sai% that1 "To acquire wealth is difficult, to preserve it more diffcult, but to nourish it wisel, the most difficult of all."
Their ,oitent to e2,e''en,e a'on #ith a roots !p approa,h to resear,h an% ana'ysis3 ,o!p'e% #ith te,hno'oy %ri/en pro,esses has ena"'e% !s to e2,e' at this ,ha''enin tas0 an% in a span of fo!r years eere as one of the 'ea%in %istri"!tion ho!ses of the ,o!ntry.
e& St!en%t"s' •
Research 2ased adice from the s$ecial research team9
•
-iterature for the u$date of kno5ledge4 this is the uni0ue feature of com$any 5here no other com$any $roides literature9
•
.roides the fund u$dates on the 5eekly and monthly 2asis9
•
'he com$any has 2ecome one of the 2igges t distri2ution com$anies in the shortest $eriod of time i9e9 ) years9
•
Country 5ide net 5ork9
.roide 5ide range of serices9
Dist!ib(ti#n Ac"ieve)ent #0 Bi!a$ s(n $i0e C#/Lt'+
•
-eading "istri2ution !ouse in the country Oer +4?4??? customer country5ide
•
??? $lus 2usiness associations
•
3ousali Institute of Management Studies4 "har5ad J
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
•
Business across all im$ortant segments : industrial4 $riate client 1rou$4 Retail and channel .artners9
•
National $resence in +A cities9
•
-eading cor$orate agent of Biral Sun -ife Insurance9
S(n Li0e Financia$ Se!vices'+ Sunlife financial serices of Canada Inc9is the ne5 holding Co4 for sunlife assurance Co9 of Canada9 Sunlife financial is the ne5 2rand of select grou$ of com$anies $roiding indiiduals and cor$orations 5ith a diersified range of $roducts and serice meeting their needs for 5ealth management as 5ell as $rotection9 %s glo2al enter$rise the sunlife financial grou$ of com$anies o$erates in key markets around the 5orld ma6or o$erating actiities are handled 2y national office in Canada9 'he united sates4 the &nited 3ingdom the .hil $ines and !ong 3ong9
Ana$&sis Aven(es #0 Invest)ent
Invest)ents
Bankde$osits Mutualfund
&espondents
* +? @? +?
3ousali Institute of Management Studies4 "har5ad K
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
!venue of "nvestments &an %eposits
M!t!a' f!n%67!ity8 M!t!a' f!n%9e"t8 10
5 45
20
Ins!ran,e (o'%
55
10 Rea' 6state )to,s
#rom the a2oe gra$h and ta2le it is clear that around *Q of the 2usiness $eo$le inest in 2ank de$osits 5hich are com$aratiely grater than other aenues of inestment9 %round +Q of 2usiness $eo$le inest in Mutual fund of 2oth E0uity and "e2t fund4 Q 2usiness $eo$le in Insurance4 @?Q in 1old4 +?Q in Real estate and Q in Stock
P(!*#se #0 Invest)ent Invest)ents
Retirement .lan ChildrenEducation Buying a !ouse.ro$erty Marriage Others
&espondents
* @? +? @? )
3ousali Institute of Management Studies4 "har5ad ,
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
#urpose of "nvestment le p o e # s s e in s u % f o . o $
50
45
40 30
20
20
20
10
Respon%ents 6
10 0
t en
e e s er !s ia;th n - :o Marr
n 6%
tire . % ren Re Chi' yi &!
#urpose
#rom the a2oe gra$h and ta2le it can 2e stated that *Q of 2usiness $eo$le inest for their retirement $lanes4 @?Q for children education4 +?Q for 2uying a house$ro$erty4 @?Q for children marriage and )Q 2usiness $eo$le for other reasons
Ave!a%e M#nt"$& Inc#)e
M#nt"$& Inc#)e5Rs6
&$to(@?4??? @?4???to?4??? ?4??? to +4??4??? %2oeH+4??4???
&espondents
@ A @ +
3ousali Institute of Management Studies4 "har5ad )?
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Monthl " ncome of %usines s #eopl e e l p 40 o e # 30 . s 20 u % f 10 o . o 0 $
35 25
25 15
20000 to 50000
50000 to 100000
$"o/e = 100000
'he aerage monthly income of @Q2usiness $eo$le is u$ to @?4??? and 2et5een @?4??? to ?4??? of AQ2usiness $eo$le and @Q2usniess $eo$le earn a monthly income of 2et5een ?4??? to +4??4??? and +Q of the 2usiness $eo$le earn more than +4??4??? a month9
Ave!a%e M#nt"$& Savin%s
M#nt"$& Savin%s5Rs6
&$ to H 4??? 4???to+?4??? +?4??? to @?4??? %2oeH@?4???
&espondents
AJ A? @ K
3ousali Institute of Management Studies4 "har5ad )+
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
!vera&e Monthl 'avin&s of %us. #eople 40
e l p o 30 e # s 20 u % f o 10 . o $ 0
Respon%ents
-10> 10>5> 20>
$"o/e 20>
!mount (Rs)
#rom the a2oe gra$h and ta2le it is clear that most of the 2usiness $eo$les aerage monthly saings are u$ to 4??? and A?Q of the 2usiness $eo$le sae 2et5een 4??? to +?4???4 @Q sae 2et5een +?4??? to @?4??? and KQ of 2usiness $eo$le sae a2oe @?4??? on an monthly saings
Invest)ent 0#! ta, Savin%s
Invest)ents
&espondents
Insurance E-SS
*@ J
..# NSC Bonds
+A @ +?
3ousali Institute of Management Studies4 "har5ad )@
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
!ousing loan
)
"nvestments for Ta* 'avin&s
10
6 40
24 7
13
Ins!ran,e
*))
??+
@)C
&on%s
:o!sin 'oan
#rom the a2oe ta2le and gra$h it can 2e kno5n that most of the 2usiness $eo$l e inest their saings in Insurance for tax saings
*@Q
2usiness $eo$le inest in
insurance4 JQ in E-SS4+AQ in ..#4@Q in NSC4 +?Q in Bonds and )Q 2usiness $eo$le in housing loan for tax saings 4 insurance occu$y the ma6or $art of the saings9
Ins(!ance an 0a)i$& *!e)i()
Ave!a%e P!e)i() *ai
+)A)
'verage Sum assured
*4A?4@??
3ousali Institute of Management Studies4 "har5ad )A
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
!vera&e premium paid and sum assured 500000 400000 300000 200000 100000 0 $/era-e prei! pai%
$/era-e s! ass!re% $o!nt
#rom the a2oe gra$h and ta2le it is clear that the aerage sum assured for insurance of the 2usiness $eo$le is *4 A?4@?? and the aerage $remium $aid on the sum assured is +)4A?
Se!vice e,*ectati#n 0!#) (! avis#!
Se!vice
Research 2ased adice Monthly fund -iterature to u$date u$date your kno5ledge !andling customer 0ueries
&espondents
@ A? @? @
3ousali Institute of Management Studies4 "har5ad )*
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Respon%ents
30 25 20 15 Respon%ents
10 5 0 Resear,h a%/i,e
Mt'y !p%ate
*iterat!re !erries
#rom the gra$h and ta2le of serice ex$ected 2y the 2usiness $eo$le from their adisor it is clear that most of the 2usiness $eo$le $refer monthly fund u$date @Q of 2usiness $eo$le ex$ected Research 2ased adice4 A?Q of ex$ects monthly fund u$date4 @?Q ex$ect literature4 and @Q 2usiness $eo$le ex$ect handling 0uarries
Res*#nent a.a!eness ab#(t BSDL
A.a!eness ab#(t BSDL
&espondents
%5are No a5are
@ J
3ousali Institute of Management Studies4 "har5ad )
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
%usiness #eople+s !wareness about %',-
25 $#are @o a#are 75
#rom the a2oe gra$h and ta2le it is clear that @Q of the 2usiness $eo$le are a5are of BS"- and JQ of the 2usiness $eo$le are not a5are of BS"-
A.a!eness #0 se!vice *!#vie b& BSDL
Se!vice
Research 2asedadice .ortfoliostatement -iterature to u$date your kno5ledge
&espondents
A +? A?
3ousali Institute of Management Studies4 "har5ad ))
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Monthlyfundu$date
@
!wareness of services #rovided b %',35
35 30 25 $o. of %us. 20 15 #eople 10 5 0
30 25 10
Resear,h ?ortfo'io st. *iterat!re Mt'y !p%ate a%/i,e 'ervices Respon%ents
#rom the a2oe ta2le and gra$h of a5areness of serice $roided 2y BS"- it is clear that AQ of 2usiness $eo$le are a5are of research 2ased adice4+?Q2usiness $eo$le are a5are of $ortfolio statement $roided 2y BS"-4 A?Q2usiness $eo$le are a5are of the literature and @Q of the 2usiness $eo$le are a5are of monthly fund u$date $roided 2y the BS"-
Pa!a)ete!s #0 )(t(a$ 0(n
Se!vices
Safe 1ro5th Redem$tion #ormalities &nderstanding a2out scheme
Ran4;/
Ra n 4 /
Ra n 4 /
Ra n 4 > /
Ra n 4
J +) @
+@ @? @+
*? AJ @,
@) +K +
+ , +?
AK
A?
+K
,
+?
@?
*
@?
3ousali Institute of Management Studies4 "har5ad )J
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Ranin& of # arameters of MF 50 40
$o. of %us #eople
30 20 10 0 )afe
(ro#th
Re%tion
+ora'ities
s,hee
#arameters Ran1.
Ran2.
Ran3.
Ran4.
Ran5
#rom the ta2le and gra$h of $arameter of mutual fund it is clear that JQ of the 2usiness $eo$le hae ranked the mutual fund as ery safe 4+)Q 2usiness $eo$le raked mutual fund as high gro5th4 @Q ranked redem$tion easy4 AKQ ranked as formalities are easy and +?Q of the 2usiness $eo$le ranked the $arameters understanding a2out the schemes as ery easy9
Finin%s'+
On an aerage *Q of the 2usiness $eo$le inest in 2ank de$o sits and ery less num2er of 2usiness $eo$le inest in mutual <2oth e0uity and de2t= funds and stock
Business $eo$le main o26ectie of inestment is their retirement $lan9
3ousali Institute of Management Studies4 "har5ad )K
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
More num2er of 2usiness $eo$le at Bosari MI"C .une are haing the income leel of @?4??? to ?4???
On an aerage the 2usiness $eo$le haing their saings 2et5een ??? to +?4???
Business $eo$le inest in insurance for their tax saings
Business $eo$le ex$ectation s from their adisors are monthly fund u$date 4 research 2ased adice4 literature and handling 0uarries of %c statement
&$ to JQ of the Business $eo$le are not a5are of BS"-
Nearly +Ard of 2usiness $eo$le are a5are a2out the follo5ing serice of BS"-9 Research 2ased adice4 literature to u$date your kno5ledge4 and monthly fund u$dates $roided 2y com$any
Rec#))enati#ns'+
%s $ercentage of a5areness of BS"- among 2usiness $eo$le is ery less thus the com$any should undertake actiities to increase the a5areness among the 2usiness $eo$le
3ousali Institute of Management Studies4 "har5ad ),
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
Business $eo$le think inesting in mutual fund is risk and only less $ercentage of 2usiness $eo$le hae ranked the safety so the com$any should conduct a5areness $rograms9
%s higher $ercentag e of 2usiness $eo$le inest in insurance for tax saings and only fe5 2usiness $eo$le hae inestments in E-SS for tax saings9 So the com$any should adertise more a2oe the tax saings schemes9
#rom the surey it is clear that there is lack of inestment $lanning among 2usiness $eo$le9 'he BS"- should hel$ and educate the inestors a2out the inestment $lans9
3ousali Institute of Management Studies4 "har5ad J?
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
ANNEXURES
9(esti#nnai!e I am student of
4#(sa$i Instit(te #0 )ana%e)ent st(ies D"a!.a 9 I am
Conducting surey on 7Inestment .attern of Business .eo$le89 In this regard I re0uest you to s$are fe5 minutes to fill u$ this 0uestionnaire9 'he information $roided 2y you is ke$t confidential and this information 5ill 2e used only for academic $ur$ose
Name
:
3ousali Institute of Management Studies4 "har5ad J+
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
%ddress
:
Business
:
.hone No :
Off :
Mo2 :
E(mail I" : %ge
:
+9 here hae you 2een inestingT a=Bankde$osits
d=1old
2= Mutual #und
e= Real Estate
c=Mutual#und<"e2t=
f=Stock
@9 .ur$ose of inestmentT a=Retirement.lane
d=Marriage
2= Children Education
e= Others
c= Buying a !ouse.ro$erty
A9 our aerage monthly 2usiness income9 a=u$toRs9@?4??? 2= @?4??? to ?4???
c=Rs9?4???to+4??4??? d= %2oe +4 ??4???
*9 our aerage saings $er monthT a=&$to4???
c=Rs9+?4???to@?4???
2= 4??? to +?4???
d= %2oe Rs4 @?4???
9 here do you inest for tax saingsT a= Insurance 2= E-SS c=..#
d= NSC e= Bonds f= !ousing -oan
3ousali Institute of Management Studies4 "har5ad J@
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
)9 !o5 much insurance coer do you and your family mem2ers hae and ho5 much $remium do you $ay annuallyT Name of .olicy !older Sum assured
.remium .aid
;/ / / >/ /
J9 Serice ex$ectation from your adisor9
a= Research 2ased adice 2= Monthly #und &$dates c= -iterature to u$date your kno5ledge d= Others
K9 %re you a5are of the serice $roided 2y Birla Sun life "istri2ution -td9T
es
No
,9 %re you a5are of the serice $roided 2y Birla Sun life "istri2ution -td9T
a= Research Based adice 2= .ortfolio statement c= -iterature to u$date your kno5ledge d= Monthly fund u$date9
+?9 'ike the follo5ing $arameters of mutual fund %9 Safe
Most safe
not at all
B9 1ro5th !igh gro5th C9 Redem$tion /ery easy
/9less gro5th /ery difficulty
"9 #ormalities /ery easy
/ery difficulty
3ousali Institute of Management Studies4 "har5ad JA
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
E9 &nderstand %2out the Scheme
/ery easy
/ery difficulty
++9 hat is your o$inion a2out the Birla Sun life "istri2ution -tdT
'hank youP Bib$i#%!a*"&
B##4s/
3ousali Institute of Management Studies4 "har5ad J*
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED ork
on Mutual #unds 2y %M#I
Inest
India Mutual #und !and2ook 2y &ma Shashikant9
Marketing
Research 2y "onald 'ull and !a5kins
Statistics
for Management 2y Richard I -ein and "aid9 S9 Ru2in9
#inancial
Management 2y M99 3han and .939Dain9
2eb sites
5559amfi9com
5559mutualfundindia9com
5559
alueresearchonline9com
5559indiainfoonline9com
5559sundarammutual9com
"ecoding sheet += %1E +9 BE-OA? @9 A+(*? E%RS
@= %/EN&ES O# IN/ES'MEN' a=9B%N3"E.OSI'S 2=9 M&'&%- #&N"
3ousali Institute of Management Studies4 "har5ad J
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
A9 *+(?E%RS
c=9M&'&%-#&N"<"EB'=
*9 %BO/E(?
d=9 INS&R%NCE e=9 1O-" f=9 RE%- ES'%'E g=9 S'OC3
A=9.&R.OSE O# IN/ES'MEN'
*= %/1 MON'!- INCOME
+=(RE'IREMEN'.-%N
+(&.'O(@?4???
2=(C!I-"ERN E"&C%'ION
@(@?4???(?4???
C(B&IN1 % !OSE.RO.ER'
A(?4???(+4 ??4???
d=(M%RRI%1E
*(%BO/E(+4??4???
e=(O'!ERS
=9MON'!-S%/IN1S
)=9'%XS%/IN1S
+9&.'O(4???
%(INS&R%NCE
@94???(+?4???
B(E-SS
A9+?4???(@?4???
C(..#
*9 %BO/E(@?4???
"(NSC E(BON"S #(!O&SIN1 -O%N
J=9 EX.EC'%'ION #ROM %"/ICER +9 RESE%RC! B%SE" %"/ICE @9 MON'!- #&N" &."%'E A9 -I'ER%'&RE 'O &."%'E O&R 3NO-E"1E *9 !%N"-IN1 O# C&S'OMER &ERIES
K=9 %%RENESS %BO&' BS"+(ES ?(NO
3ousali Institute of Management Studies4 "har5ad J)
BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED
,=9 SER/ICE O# BS"%(RESE%RC! B%SE" %"/ICE B(.OR'#O-IO S'%'EMEN' C(-I'ER%'&RE 'O &."%'E O&R 3NO-E"1E "(MON'!- #&N" &."%'E
+?= .RE#ER%NCE O# M&'&%- #&N" ON "I##EREN' .%R%ME'ERS %(S%#E B(1RO'! C( RE"&M.'ION "(#ORM%-I'IES #(&N"ERS'%N"IN1 %BO&' SC!EMES
3ousali Institute of Management Studies4 "har5ad JJ