Structure of mutual funds

A mutual fund is set up in the form of a trust, which includes trustees, AMC and custodian. The trust is established by a sponsor or more than one sponsor who is like the promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Either the sponsor should appoint four trustees or establish a trustee company with at least four independent directors. Additionally, at least two thirds of the trustees or the directors should be independent and not associated with the sponsor in any way. All the schemes launched by the AMC have to be approved by the trustees prior to launch. The trustees will be reviewing all the transactions of the AMC on a quarterly basis while filing reports to SEBI on a half yearly basis.

Asset Management Company (AMC) is approved by SEBI and is responsible for managing funds by making investments in various types of securities. The Custodian is registered with SEBI and holds the securities of various schemes of the fund in its custody. All mutual funds are required to be registered with SEBI before they launch any scheme. The detailed working of above stated entities will be discussed in latter parts of the module.

           

           

• Related Articles

• Goal-based investing using mutual funds (retirement, education etc.)

  How to plan your retirement through Mutual Funds? Everyone looks forward to retirement years after having shouldered all the earthly responsibilities. People often refer to retirement years as golden years because they don’t have to worry about going ...

• Classification of Mutual Fund

  1. By structure Mutual fund schemes are structured differently. Some schemes are open for purchase and repurchase on a perpetual basis. Once the scheme is launched, the scheme remains open for transactions, and hence the name of this category of ...

• Goal-based investing using mutual funds (retirement, education etc.)

  Child Oriented Mutual Funds Child oriented mutual fund or children’s fund is a fund for child-specific goals. It is one category of mutual funds where parents invest for their children’s future requirements. These requirements could vary from child’s ...

• Introduction to Mutual Fund

  Mutual funds seek to mobilize money from all possible investors. Various investors have different investment preferences and needs. In order to accommodate these preferences, mutual funds mobilize different pools of money. Each such pool of money is ...

• Mutual fund scheme categorization

  With a view to bring in standardization in the classification of mutual funds and to ensure the schemes are clearly distinct from one another, SEBI issued a circular on Categorization and Rationalization of Mutual Fund Schemes in 2017. The objective ...