Theme: Organizational aspects and procedure of mutual funds

Organisation Structure of Mutual Funds in India

There are three main players involved in setting up a mutual fund business in India namely the sponsor, the AMC and the mutual fund trust. They are assisted by banks, registrars, transfer agents, depository participants and custodians for the smooth operation of investment funds.

(1) Sponsor: The promoter of a mutual fund company is known as the sponsor of the mutual fund. A sponsor establishes a mutual fund on its own or in cooperation with another company through its subsidiary for the purpose of receiving income from the management of the fund. The company that manages the funds as the investment manager of the fund is called AMC.
(2) Trustee: Sponsors create a trust in favor of trustees through a trust deed. The trustees manage the trust and are primarily responsible as trustees to the investors in the mutual funds. The primary responsibility of guardians is to ensure that due diligence is followed. All funds managed by the AMC must be authorized by the trustees.
(3) AMC: Asset Management Company initiates the sponsoring activities and manages the funds of the AMC Trust. A small fee is charged for managing trust funds. AMC plans all schemes, launches schemes and resources, manages funds and provides services to investors. Fund managers are appointed by the AMC to manage the various MF schemes managed by the AMC.
(4) Custodian: In mutual funds, AMC buys various securities like stocks, bonds, gold etc. in various schemes. These Securities are purchased on behalf of the Trust but are not held in the custody of the Trust. The custodian is responsible for the safekeeping of securities. Now holding financial securities in the form of demat.
(5) Registrar and Transfer Agent: Registrar and transfer agent are separate entities. The registrar and transfer agent are responsible for handling investor applications, creating units when new applications are received, withdrawing units when investors submit returns, maintaining comprehensive investor accounts and processing dividend payments on behalf of its mutual fund client. responsible for many administrative tasks.
Mutual funds may be classified by underlying investment as described in the prospectus and investment objective. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds, and hybrid funds. Within these categories, funds may be sub-classified by investment objective, investment approach or special focus.
The types of securities that a particular fund may invest in are specified in the fund's prospectus, which is a legal document that describes the fund's investment objective, investment approach and permitted investments. The investment objective describes the type of return the fund is looking for. For example, a mutual fund typically seeks to generate more income from appreciation in the price of the securities it owns, rather than from dividends or interest income. The investment approach describes the criteria the fund manager uses to select investments for the fund.
Bonds, stocks, and hybrid funds can be classified as either index (or passively managed) or actively managed funds.
Alternative investments that include advanced techniques such as hedging.