Mutual Fund

Mutual fund is the most popular investment scheme, as it offers an easy way to invest. As per the Securities and Exchange Board of India (Regulations) 1996, a mutual fund may be defined as a fund established in the form of a trust to raise money from the public or a portion of the public though one or more than one schemes for investing in securities including the money market instrument.

The mutual fund is special type of financial institution, which acts as an investment conduct. It may be created or established by an individual or an individual in association with a body corporate, which together may be referred to as the sponsor. A mutual fund may be established in the form of a board of trustee, which will remain responsible for managing the affairs of the fund. As per the Securities and Exchange Board of India regulations more than 50% of the trustee must be individuals having sufficient knowledge and expertise in the field. This board of trustee needs to be registered as per the Indian trust act.

In order to manage the fund the board of trustee appoints one asset management company, which on behalf of the fund floats the schemes in order to raise money from the public. It is also responsible for investing the proceeds (pooled fund) into the securities to form portfolio. This company should be guided by the Securities and Exchange Board of India regulations in the matter of pooling and submit necessary reports and to provide information relating to the fund to the board of trustee regularly.

For investing into securities including money market instruments it may also provide services to others in the management of portfolio, special funds like special purpose funds, technological fund, Real estate fund etc.