|
Working Of Mutual Funds And Their Performance
It needs to be clarified that mutual funds invest their funds in capital market
instruments such as shares, debentures, bonds and money market instruments and therefore
the net asset value of such investments will reflect the market values of underlying
assets. These market values fluctuate and therefore the net asset values of the mutual
fund schemes also fluctuate.
All the capital market instruments have varying degrees of risk, the degree of risk
being the highest in equities and the risk factor is highlighted in the respective offer
documents as well as in the abridged offer documents. The investor therefore is in the
full knowledge and understanding of the risks involved in various schemes. As per SEBI
regulation all mutual funds disclose their portfolio periodically and all open-ended funds
offer exit option to investors at NAV based price.
In the current year, the share market is passing through a bear phase with prices
falling across the board and steeply in the technology scrips. Reflecting this fall in
share prices, the NAVs of most of the equity schemes in general and of the technology
funds in particular have also fallen. This fall in the NAVs should therefore be viewed in
the context of the fall in the share prices, a phenomena which is world wide today. The
fall in NAVs not only affects the investors but it has an impact on the fees and earnings
of the investment managers also.
It may be recalled that the mutual funds have given good returns while the market was
in the upswing and even today, the non-equity schemes which account for about 60 percent
of total assets under management provide competitive rates of returns.
Mutual Funds Function Within Strict Regulatory Framework
The Association of Mutual Funds In India (AMFI) reassures the investors in units of
mutual funds that the mutual funds function within the strict regulatory framework.
The different entities such as the Mutual Fund, the Asset Management Company and the
Custodian operate as per the provisions of the SEBI Mutual Fund Regulation 1996 and the
rules and guidelines issued by SEBI. Each of these entities has independent Boards of
Directors and separate auditors.
SEBI keeps a close watch on the mutual funds through periodical reports and every three
months, each mutual fund submits to SEBI a report conforming compliance with regulatory
provisions and mutual funds are required to record their investment decisions. Any
deficiency or non-compliance is dealt with suitably by SEBI.
Every year, each mutual fund is inspected by SEBI and such inspection is both a
detailed scrutiny of operations and a rectification exercise. Thus, the mutual funds are
strictly supervised and regulated entities and the regulatory provisions match with
international standards.
AMFI also is engaged in upgrading professional standards and in promoting best industry
practices in diverse areas such as valuation, disclosure, transparency etc.
Viewing The Mutual Fund Industry In The Right Perspective
The mutual fund industry is a fast growing segment of the Indian Financial Market
and it provides a variety of schemes to suit the needs and risk return profile of
different categories of investors who are kept completely informed regularly through
periodical reports and statutory disclosures.
AMFI as the umbrella body of the mutual fund industry which has Unit Trust of India and
all mutual funds as its members would like to reiterate that investors in mutual fund
schemes should not be influenced much less guided by any misplaced and patently wrong
propaganda being carried out in some quarters.
If any person or organisation has any specific complaint about any mutual fund,
they are requested to approach SEBI, which is the regulatory authority for mutual funds. |
