Contents. Foreword to the Second Edition 13. Foreword to the First Edition 15. Preface to the Fifth Edition 17. Acknowledgements 19

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1 Contents 7 Contents Foreword to the Second Edition 13 Foreword to the First Edition 15 Preface to the Fifth Edition 17 Acknowledgements 19 Chapter 1: Introduction What is a Mutual Fund? Who are the Parties Involved? Capital Flow in the Economy Corporate Governance Schemes and Units Net Asset Value (NAV) Benefits of Investing in Mutual Funds Limitations of Mutual Funds Indian Mutual Fund Industry (Size) 29 Annexure 1.1: Assets under Management ( ) 31 Annexure 1.2: Mutual Funds and Average AUM 31 Chapter 2: Mutual Fund Schemes and Comparable Products Types of Schemes by Tenor Types of Schemes by Asset Class Types of Schemes by Position Philosophy Types of Schemes by Solution Orientation Types of Schemes by Geography Fund of Funds (FoF) Schemes Schemes versus Options or Plans Comparison with Other Products 54

2 8 Indian Mutual Funds Handbook 2.9 Indian Mutual Fund Industry (Schemes) 58 Annexure 2.1: Assets under Management (Category and Type-wise) 60 Annexure 2.2: Distribution of Investor Accounts 61 Annexure 2.3: Age-wise Analysis of Investor Accounts 62 Chapter 3: Legal Structure of Mutual Funds in India Sponsor Trusteeship Asset Management Company (AMC) Maintenance of Investor Records Unique Client Code Custody of Investments Setting up a Mutual Fund Operation Change in Fundamental Attributes Mergers and Acquisitions Categorisation and Rationalisation of Mutual Fund Schemes 81 Chapter 4: Investments by Mutual Fund Schemes Types of Equity Risks in Equity Investing Value Drivers in Equity Market Valuation of Equity Securities in Mutual Fund Schemes Equity Investment Restrictions for Mutual Funds Management of Equity Portfolio Types of Debt Risks in Debt Investing Yield to Maturity and Price Valuation of Debt Securities in Mutual Fund Schemes Debt Investment Restrictions for Mutual Funds Management of Debt Portfolio Types of Derivatives Investment in Derivatives by Mutual Funds Gold Real Estate 120 Chapter 5: Expenses, Net Asset Value and Loads Initial Issue Expense Deferred Load Net Asset Value Recurring Expenses Load and Its Implications 130

3 Contents Profitability Metric 131 Chapter 6: Liability of Schemes Unit Capital Accounting Management of Liquidity 136 Chapter 7: Offer Document, Key Information Memorandum and Advertising Scheme Information Document (SID) Statement of Additional Information Standard Observations Key Information Memorandum Extracts from Select Offer Documents Advertising 150 Annexure 7.1: Key Contents of SID 153 Annexure 7.2: Key Contents of SAI 161 Annexure 7.3: Format of Key Information Memorandum 164 Chapter 8: Financial Statements Asset Management Companies Schemes Disclosures and Other Commitments 170 Chapter 9: Scheme Comparison Returns Absolute Returns Relative Returns 182 Chapter 10: Scheme Comparison Risk Quantitative Factors Quantitative Factors Applicable Only to Debt Qualitative Factors 206 Chapter 11: Scheme Comparison Risk Adjusted Returns Sharpe Ratio Treynor Ratio Jensen Alpha Eugene Fama Appraisal Ratio Modigliani and Modigliani (M2) Sortino Ratio Which is the Best Measure? CRISIL s Rating and Ranking 231

4 10 Indian Mutual Funds Handbook Chapter 12: Scheme Comparison Investment Objective, 233 Style Analysis and Other Factors 12.1 Investment Objective Investment Styles Qualitative Factors 242 Chapter 13: Performance Attribution, Drivers and Smart Beta Performance Attribution Alpha Drivers and Beta Drivers Smart Beta 253 Chapter 14: Managing a Portfolio of Mutual Fund Schemes Risk Profiling Asset Classes and Generic Risk Asset Allocation Scheme Selection Exit from Schemes Tips and Tricks 265 Chapter 15: Mechanics of Investing in Mutual Funds: KYC, 267 KYD and Investor Empowerment 15.1 Who Can Invest in Mutual Fund Schemes? Investment by Qualified Foreign Investors (QFIs) Investment by Foreign Portfolio Investors (FPIs) Who cannot Invest in Mutual Fund Schemes? Minimum Number of Investors Know Your Customer (KYC) Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP) and Systematic Transfer Plan (STP) Switches, Triggers and Dividend Transfer Plan (DTP) Steps to Invest / Dis-invest Mutual Fund Units 275 (Other than through Stock Exchange) Steps to Invest / Dis-invest Mutual Fund Units 275 (Through Stock Exchange) Mutual Fund Utilities The Aggregater Cut-Off Time Official Points of Acceptance Post-Investment Servicing Who Can Distribute Mutual Funds and Earn Brokerage Know Your Distributor (KYD) Brokerage, Commission and Transaction Charge Supervision of Large Distributors 287

5 Contents Investor Empowerment 290 Annexure 15.1: SIP NAV up 1% 291 Annexure 15.2: SIP NAV down 1% 292 Annexure 15.3: SIP Random 293 Chapter 16: Investor Protection Structural Protection Role of AMFI Rights of Unit Holders Investor Relations Officer SEBI Implications Under Various Other Statutes The Role of Press 299 Annexure 16.1: Form for Nomination / Cancellation of Nomination 300 Chapter 17: Taxation Asset Management Companies Mutual Fund Schemes Investors Tax in Specific Situations Tax in Summary 318 Chapter 18: Big Data, Artificial Intelligence, Block-chain and Mutual Funds Big Data Artificial Intelligence Block-chain 324 List of Abbreviations and Acronyms 327 Glossary 330 Further Learning 334 Websites 334 Journals 334 References 335 Index 340

Contents. Foreword to the Second Edition 13 Foreword to the First Edition 15 Preface to the Third Edition 17 Acknowledgements 19

Contents. Foreword to the Second Edition 13 Foreword to the First Edition 15 Preface to the Third Edition 17 Acknowledgements 19 Contents 1 Contents Foreword to the Second Edition 13 Foreword to the First Edition 15 Preface to the Third Edition 17 Acknowledgements 19 Chapter 1: Introduction 21 What is a Mutual Fund? 22 Who are the