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Mutual Funds Guide by Instructor Sahar Idrees
- 1. Instructor: Sahar Idrees Bs Commerce 5th Department Of Commerce GCWUF
- 2. Mutual Funds
- 3. CONTENTS Introduction & Concept of Mutual funds. Working of Mutual funds. History & Phases of Mutual funds. Structure & Flow of Mutual funds. Types of Mutual Funds. Mutual Fund Performance.
- 4. Mutual fund and its Concept
- 5. Mutual Funds • A Mutual Fund is a trust that pools together the savings of a number of investors who share a common financial goal. • The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.
- 6. Mutual Funds Mutual Funds Professional Fund Managers •MBA’s •CA’s •CFA’s The Investor Investments •Stocks • Money Markets •TFC’s •Bank Deposits •CFS
- 7. In 1893, the first closed-end fund “The Boston Personal Property Trust” was formed. In Pakistan National Investment Trust (NIT) offered first open end fund in 1962. ICP offered a series of closed end funds in 1966, these were later privatized in 2000. History of Mutual Funds
- 8. History of Mutual Funds The first mutual fund was established in Europe. First mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. Mutual funds were introduced into the United States in the 1890s. They became popular during the 1920s.
- 9. Pool their money with INVESTORS FUND MANAGERS Passed back to Generate SECURITIES Invest in RETURNS How Mutual Fund works?
- 10. Flow of Mutual Funds
- 11. Investors Fund Securities Return Given back to That generates Which is invested in Pool their money in Mutual Funds Operations
- 12. PERFORMANCE OF MUTUAL FUND COMPANIES OF PAKISTAN
- 13. STRUCTURE BACKGROUND Open end and closed end funds are established through a trust deed as a trust under the trust act 1888. Investment Company is established as a limited liability company. Operated by two parties i.e. fund manager and the trustee or custodian. Central Depository Company (CDC) largest trustee of mutual funds in Pakistan with almost 90% of the market share. Securities and Exchange Commission of Pakistan (SECP) through Non- bank financial companies (NBFCs) Regulations 2008 regulates the mutual fund industry.
- 14. Mutual funds today At the end of 2019, mutual fund assets worldwide were $54.9 trillion, according to the Investment Company Institute.The countries with the largest mutual fund industries are: United Kingdom: $26.7 trillion Australia: $5.3 trillion Ireland: $3.4 trillion Germany: $2.5 trillion Luxembourg: $2.2 trillion
- 15. France: $2.2 trillion Japan: $2.1 trillion Canada: $1.9 trillion United States: $1.9 trillion China: $1.4 trillion In the United States, mutual funds play an important role in U.S. household finances. At the end of 2019, 23% of household financial assets were held in mutual funds. Their role in retirement savings was even more significant since mutual funds accounted for roughly half of the assets in individual retirement accounts, 401(k)s and other similar retirement plans.In total, mutual funds are large investors in stocks and bonds.
- 16. REFERENCES: Recommended Book: “The Development and Regulation of Non-Bank Financial Institutions,” The World Bank, Jeffery Carmichael, Michael Pomerleano. Savings and Capital Markets by SECP Weblinks: www.Investopedia.org.pk https://en.wikipedia.org/wiki/Mutual_fund
Notes de l'éditeur
- A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities. Each shareholder, therefore, participates proportionally in the gains or losses of the fund. Mutual funds invest in a vast number of securities, and performance is usually tracked as the change in the total market cap of the fund—derived by the aggregating performance of the underlying investments.
- A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities. Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price. Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek. Mutual funds charge annual fees (called expense ratios) and, in some cases, commissions, which can affect their overall returns. The overwhelming majority of money in employer-sponsored retirement plans goes into mutual funds.
- The first modern investment funds (the precursor of today's mutual funds) were established in the Dutch Republic. In response to the financial crisis, of 1772–1773, Amsterdam-based businessman Abraham (or Adriaan) van Ketwich formed a trust named Eendragt Maakt Magt ("unity creates strength"). His aim was to provide small investors with an opportunity to diversify.[2][3] Mutual funds were introduced to the United States in the 1890s. Early U.S. funds were generally closed-end funds with a fixed number of shares that often traded at prices above the portfolio net asset value. The first open-end mutual fund with redeemable shares was established on March 21, 1924, as the Massachusetts Investors Trust (which still in existence today and managed by MFS Investment Management). In the United States, closed-end funds remained more popular than open-end funds throughout the 1920s. In 1929, open-end funds accounted for only 5% of the industry's $27 billion in total assets. After the Wall Street Crash of 1929, the United States Congress passed a series of acts regulating the securities markets in general and mutual funds in particular. The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the SEC and that they provide prospective investors with a prospectus that discloses essential facts about the investment. The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual funds, report regularly to their investors. This act also created the Securities and Exchange Commission, which is the principal regulator of mutual funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds. It allowed mutual funds to be treated as a flow-through or pass-through entity, where income is passed through to investors who are responsible for the tax on that income. The Investment Company Act of 1940 established rules specifically governing mutual funds. These new regulations encouraged the development of open-end mutual funds (as opposed to closed-end funds).[4] Growth in the U.S. mutual fund industry remained limited until the 1950s when confidence in the stock market returned. In the 1960s, Boston's Fidelity Investments began the marketing of mutual funds to the public at large, rather than only wealthier individuals or those working in the finance industry.[5] The introduction of money market funds in the high-interest rate environment of the late 1970s boosted industry growth dramatically. The first retail index fund, First Index Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the "Vanguard 500 Index Fund" and is one of the world's largest mutual funds. Beginning the 1980s, the mutual fund industry began a period of growth that has continued largely uninterrupted through the present day. (For instance, global mutual fund assets have increased in every year since 2003 except for 2008 and 2011.[6][7])
- According to Robert Pozen and Theresa Hamacher, growth was the result of three factors: A bull market for both stocks and bonds, New product introductions (including funds based on municipal bonds, various industry sectors, international funds, and target date funds) and Wider distribution of fund shares. Among the new distribution channels were retirement plans. Mutual funds are now the a preferred investment option in certain types of retirement plans, specifically in 401(k), other defined contribution plans and in individual retirement accounts (IRAs), all of which surged in popularity in the 1980s.[8] In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of fund shareholders. Some fund management companies allowed favored investors to engage in late trading, which is illegal, or market timing, which is a practice prohibited by fund policy. The scandal was initially discovered by former New York Attorney General Eliot Spitzer and led to a significant increase in regulation. In a study about German mutual funds Gomolka (2007) found statistical evidence of illegal time zone arbitrage in trading of German mutual funds.Though reported to regulators BaFin never commented on these results.